Classical economists and Keynesian economists respect each other but hold very different views about how to read the quantity theory of money. According to the classical view,
a. velocity is constant (Keynesians agree), which means changes in price will cause changes in price or quantity (Keynesians disagree)
b. quantity is constant (Keynesians agree), which means changes in the money supply could cause either changes in velocity or changes in prices (Keynesians disagree)
c. velocity and price are constant (Keynesians disagree) so that changes in the money supply cause changes in quantity (Keynesians disagree)
d. velocity and quantity are constant (Keynesians disagree) so that changes in the money supply only cause changes in prices (Keynesian disagree)
e. velocity is constant while quantity is variable (Keynesians disagree) so that changes in the money supply change both price and quantity (Keynesians disagree)
D
You might also like to view...
The portion of the money supply controlled by a central bank is
a. currency. b. deposits. c. reserves. d. the monetary base. e. the money multiplier.
If the interest rates in an economy are close to zero, _____
a. there will be an excess demand for loanable funds b. the economy will be likely to fall into a liquidity trap c. expansionary monetary policy will be effective, but not contractionary monetary policy d. contractionary monetary policy will be effective, but not expansionary monetary policy