The quantity theory of money concludes that an increase in the money supply causes a proportional
A) Increase in prices.
B) Increase in real output.
C) Decrease in velocity.
D) Increase in velocity.
E) Decrease in prices.

Question

Quizplus · Accepted Answer

The quantity theory of money states that a change in the money supply results in a proportionate change in the price level. Therefore, an increase in the money supply will cause an increase in prices.

The Quantity Theory of Money Concludes That an Increase in the Money