When money demand varies with the interest rate, how does this affect the velocity of money circulation?

Show Answers

It remains stable, and the quantity theory of money is valid.It stays fixed, supporting the quantity theory of money.It fluctuates, causing the quantity theory of money to be invalid.It remains stable, but the quantity theory of money fails.

Explanation

If the demand for money is influenced by the interest rate, the velocity of circulation is not constant, which means the quantity theory of money does not hold true.