The quantity theory of money asserts that inflation is the result of growth in
A) potential GDP.
B) the quantity of money.
C) the natural rate of unemployment.
D) money wages.

Question

Quizplus · Accepted Answer

The quantity theory of money states that there is a direct relationship between the quantity of money in circulation and the level of prices. In other words, if the supply of money increases faster than the supply of goods and services, then the value of money will decrease, resulting in inflation. Therefore, inflation is the result of growth in the quantity of money. The other options are not directly related to inflation according to the quantity theory of money.

The Quantity Theory of Money Asserts That Inflation Is the Result