Multiple choice

According to the quantity theory, the quantity of money determines the

  1. interest rate

  2. level of real output

  3. price level

  4. level of employment

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The quantity theory of money (MV = PQ) states that the quantity of money (M) determines the price level (P) in the economy, assuming velocity (V) and real output (Q) remain stable. It does not directly determine interest rates, real output levels, or employment levels - those are influenced by other factors.