The quantity theory of money and the equation of exchange provide good short-run explanations of the effects of the money supply on the larger economy.

Question

Quizplus · Accepted Answer

The quantity theory of money and the equation of exchange are actually long-run theories, and they may not provide accurate short-run explanations of the effects of the money supply on the larger economy. Short-term economic changes may occur due to other factors, such as changes in consumer spending or government policies.

The Quantity Theory of Money and the Equation of Exchange