The quantity theory of money states that

Question

Quizplus · Accepted Answer

The quantity theory of money suggests that there is a direct relationship between the quantity of money in an economy and the price level. In other words, if the money supply increases faster than the growth of goods and services, then inflation is likely to occur. Therefore, the correct statement is that inflation increases when the money growth rate increases. Choices A, C, and D are incorrect statements that do not accurately reflect the quantity theory of money.

The Quantity Theory of Money States That