Empirical evidence across numerous countries indicates that changes in the ________ are associated with nearly equiproportional changes in ________.

Question

Quizplus · Accepted Answer

The relationship between money supply and price level is known as the quantity theory of money and is supported by empirical evidence from various countries. According to this theory, an increase in the money supply leads to an equiproportional increase in the price level, ceteris paribus. Therefore, changes in the money supply are associated with changes in the price level, not real GDP or income velocity of money.

Empirical Evidence Across Numerous Countries Indicates That Changes in the ________