If the quantity theory of money is valid,then the LM curve:
A) slopes upward and to the right.
B) slopes downward and to the right.
C) is vertical.
D) is horizontal.

Question

Quizplus · Accepted Answer

The quantity theory of money states that changes in the money supply lead to proportional changes in the price level. Therefore, in the long run, the LM curve is vertical because changes in the money supply only affect the nominal interest rate and not real output or income.

If the Quantity Theory of Money Is Valid,then the LM