The quantity theory of money ________.
A)suggests that inflation is always and everywhere a monetary phenomenon which has been shown to always be supported by the data
B)validates the classical assumption that wages and prices are completely flexible in the short run
C)provides a better description of short run fluctuations in inflation and money growth than the link between these variables in the long run
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The quantity theory of money primarily suggests that inflation is a monetary phenomenon over the long term, but it does not always perfectly align with short-term data, nor does it validate the assumption that wages and prices are completely flexible in the short run. It also generally provides a better description of the long-run relationship between money growth and inflation, rather than short-run fluctuations.

The Quantity Theory of Money ________