The quantity theory of money assumes that the velocity of money:
A) is constant.
B) will rise if the money supply rises and fall if the money supply falls.
C) will rise if the money supply rises, but it will not change if the money supply falls.
D) will fall if the money supply rises, and it will rise if the money supply falls.

Question

Quizplus · Accepted Answer

The quantity theory of money assumes that the velocity of money is constant, meaning that the same dollar bill or coin is used repeatedly in transactions within a given time period. This assumption allows for predictions of how changes in the money supply will affect inflation and economic growth.

The Quantity Theory of Money Assumes That the Velocity of Money