The quantity theory of money predicts that the main cause of inflation is increases in:
A) prices.
B) real output.
C) consumption.
D) the money supply.

Question

Quizplus · Accepted Answer

The quantity theory of money states that inflation is primarily caused by an increase in the money supply. As the amount of money in circulation increases, the demand for goods and services also increases, driving up prices. Therefore, an increase in the money supply is the main driver of inflation.

The Quantity Theory of Money Predicts That the Main Cause