According to the quantity theory of money,an increase in the money supply will cause the price level to:
A) remain relatively constant since money is neutral.
B) increase by about the same percentage as the money supply.
C) increase by a greater percentage than the money supply.
D) increase by a smaller percentage than the money supply.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, there is a direct relationship between the money supply and the price level. Specifically, if the quantity of money in an economy increases, the price level will also increase. This is because an increase in the money supply leads to more money chasing the same amount of goods and services, which drives up prices. The relationship between the money supply and the price level is generally proportional, meaning that an increase in the money supply will cause prices to increase by about the same percentage. Therefore, choice B is the best answer.

According to the Quantity Theory of Money,an Increase in the Money