The quantity theory of money predicts that the inflation rate will be equal to ________.
A) the growth rate of the money supply
B) the growth rate of real GDP
C) the growth rate of the money supply + the growth rate of real GDP
D) the growth rate of the money supply - the growth rate of real GDP

Question

Quizplus · Accepted Answer

The quantity theory of money predicts that the inflation rate will be equal to the growth rate of the money supply minus the growth rate of real GDP. This is because inflation occurs when the money supply grows faster than real output, leading to a decrease in the purchasing power of money.

The Quantity Theory of Money Predicts That the Inflation Rate