An assumption of the quantity theory of money is that real GDP
A) remains relatively constant.
B) rises with increases in the money supply.
C) rises with increases in the velocity of money.
D) rises with increases in the price level.

Question

Quizplus · Accepted Answer

The quantity theory of money assumes that real GDP remains relatively constant in the short run, which means that changes in the money supply or velocity of money will mainly affect the price level. Therefore, option A is the correct answer.

An Assumption of the Quantity Theory of Money Is That