Question
Which of the following statements is NOT correct in the
context of quantity theory of money?Solution
According to the quantity theory of money, the quantity of money available determines the price level in the economy and the growth rate in the quantity of money available determines the inflation rate in the economy. Moreover, because money is neutral, the economy’s output is determined by factor supplies and technology . However, it is not necessary for the velocity of money to increase with the increase in the quantity of money.
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p _ q q q _...
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SIMULTANEOUSLY
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G G G _ _ G H ...
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