Which of the following statements is least accurate? According to the quantity theory of money: A) the price level is equal to the quantity of output divided by the money supply. B) velocity is determined by institutional factors. C) inflation is a function of increases in the money supply. D) velocity and real output are not determined by the money supply
is it A? MV=PY, doesn’t seem to be correct.
A
Why do you think A map?
I go with A too, the other 3 don’t make sense.
Well, in the quantity of money theory M= money, V=velocity, P=prices, Y=output, or real GDP. M*V=P*Y, P is M*V/P
A is correct. I’m having trouble wrapping my head around quant theory of money. 2 are static, which ones are those?
Oh wait, could be D. Or not, LOL… ETA>>
map1 Wrote: ------------------------------------------------------- > Well, in the quantity of money theory M= money, > V=velocity, P=prices, Y=output, or real GDP. > > M*V=P*Y, P is M*V/P you mean P = MV/Y right?
right, just switch the factors around:)
Velocity and Real output change very slowly, M and P result in proportional increases (inflation)