The quantity theory of money asserts that an increase in the quantity of money leads to an equal percentage increase in the price level in the long run.

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The quantity theory of money, often represented by the equation MV = PQ (where M is the quantity of money, V is the velocity of money, P is the price level, and Q is the output of goods and services), suggests that in the long run, a change in the quantity of money in an economy will lead to a proportional change in the price level, assuming velocity (V) and output (Q) are constant.

The Quantity Theory of Money Asserts That an Increase in the Quantity