According to the quantity theory of money, a 25 percent change in M, the quantity of money, leads to a 25 percent change in

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The quantity theory of money states that the level of prices in an economy is directly proportional to the amount of money in circulation, assuming that the velocity of money and the level of real output remain constant. Therefore, a 25 percent change in the quantity of money (M) would result in a 25 percent change in the price level (P).

According to the Quantity Theory of Money, a 25 Percent