CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

An assumption of the quantity theory of money is that ______

A. the velocity of circulation is not influenced by potential GDP.
B. potential GDP is influenced by the quantity of money.
C. the velocity of circulation is not influenced by the quantity of money.
D. the quantity of money is not influenced by potential GDP.
Correct Answer: C

User Contributed Comments 6

User Comment
johnowens MV = PQ
V = PQ/M
so money supply will affect velocity?
charliedba No. The equation does not give you "this causes that" thing. It simply says "this equals that".
Rubbish V and Q are usually held constant.V is influenced by the organisation of the banks, not the quantity of money.
schweitzdm Another way to see this:

M and V are on the same side of the equation.

Thus, they do not influence each other in the context of this question.
choas69 i still need explanation
812hanna Why not B?
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