Question
Macroeconomics Question on Behavioural and technological functions
Which of the following statements is NOT correct in the context of quantity theory of money?
A
The quantity of money available determines the price level in the economy.
B
The growth rate in the quantity of money available determines the inflation rate in the economy.
C
The velocity of money must rise with the increase in the quantity of money in the economy.
D
The economy's output is determined by factor supplies and technology, because money is neutral.
Answer
The velocity of money must rise with the increase in the quantity of money in the economy.
Explanation
Solution
The correct option is (C): The velocity of money must rise with the increase in the quantity of money in the economy.