According to the quantity theory of money, an increase in the money supply causes an increase in
A) production.
B) the velocity of money.
C) real GDP.
D) prices.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the money supply leads to an increase in prices. This is because the increase in the supply of money lowers its value relative to goods and services, causing prices to rise. The other choices (production, velocity of money, and real GDP) may also be affected by changes in the money supply, but they are not direct consequences of the quantity theory of money.

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