Which of the following best describes the relationship between the velocity of money and the demand for money?
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A. B. C. D.D
When decision makers conduct a specific amount of business with a smaller amount of money, their demand for money balances is reduced. Each dollar, though, is now being used more often.
Therefore, the velocity of money is increasing. Thus, for a given income level, when the demand for money declines, the velocity of money increases.