According to the 'quantity theory of money', inflation is caused by:

Question

Quizplus · Accepted Answer

According to the quantity theory of money, inflation is caused by an increase in the money supply that outpaces the growth of real output (GDP). When the money supply grows faster than the economy's ability to produce goods and services, it leads to more money chasing after the same amount of goods, which ultimately results in higher prices and inflation. Therefore, the best choice is option D, which states that inflation is caused by the money supply growing faster than GDP.

According to the 'Quantity Theory of Money', Inflation Is Caused