Quantity Theory of Money Put to Test
The Quantity Theory of Money states that money supply has a direct, proportional relationship with prices. While accepted for decades, it was challenged by Keynesian economics. Since then, the theory has been modified, as it has been generally accepted that it holds true in the long run, but its validity in the short run is in question. Using data from the nation of Albania, and simplifying velocity to be constant, the theory was put to test.
How to Test the Quantity Theory of Money