In the quantity theory of money:

Question

Quizplus · Accepted Answer

The quantity theory of money asserts that the price level is directly proportional to the supply of money in an economy. In other words, an increase in the money supply will lead to a proportional increase in the price level, while a decrease in the money supply will lead to a proportional decrease in the price level. Therefore, choice A is correct as it correctly identifies that the price level is a function of the supply of money. Choices B, C, and D are incorrect as they do not accurately describe the relationship between the money supply and the price level.

In the Quantity Theory of Money