Which of the following is a feature of the Quantity Theory of Money in its classical form?
A. Output is determined by aggregate demand
B. Money supply determines the price level assuming full employment and constant velocity
C. Velocity of money is variable and unstable
D. Interest rates determine money demand only
Answer: Option B
Solution (By JKSSB Mock Tests)
In the classical Quantity Theory (MV = PT), with V and T assumed constant and full employment, changes in money supply (M) lead to proportional changes in the price level (P).
Explanation:
A firm continues to operate in the short run as long as price covers average variable cost. If price falls below AVC, the firm shuts down to minimise losses.
Explanation:
The MFN principle requires that any trade advantage granted to one WTO member must be extended to all other members, ensuring non-discrimination.
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