"Accoring to the Quantity Theory of Money, if the money supply remains unchanged, but the value...

"Accoring to the Quantity Theory of Money, if the money supply remains unchanged, but the value of transactions in an economy has increased, then"

a.the velocity of money decreased

b.the velocity of money increased

c.the central bank shifted policy towards discount loans

d.money demand decreased

Solutions

Expert Solution

The right answer is option B, that is, the velocity of money increased. As we know velocity of money means how many times a dollar bill is changing the hands, therefore, when the value of transactions in the economy increases it implies that the same dollar bills are changing hands frequently that implies the velocity of money has increased.

Rahul Sunny answered 1 year ago

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