The money supply falls from $1,200 billion to $1,160 billion.According to the simple quantity theory of money,the price level will decline by __________ percent.

Question

Quizplus · Accepted Answer

According to the simple quantity theory of money, the price level is directly proportional to the money supply. The percentage change in the money supply is calculated as ((1,160 - 1,200) / 1,200) * 100 = -3.33%. Therefore, the price level will decline by 3.33 percent.

The Money Supply Falls from $1,200 Billion to $1,160 Billion