Given constant velocity and output, the notion that prices rise when more money is created:
A) is known as the natural rate theory
B) was first explained by Milton Friedman
C) is known as the Fisher effect of money
D) is known as the quantity theory of money

Question

Given constant velocity and output, the notion that prices rise when more money is created: 
A) is known as the natural rate theory
B) was first explained by Milton Friedman
C) is known as the Fisher effect of money
D) is known as the quantity theory of money

Quizplus · Accepted Answer

The notion that prices rise when more money is created is known as the quantity theory of money. This concept states that there is a direct relationship between the quantity of money in circulation and the level of prices. The theory was first proposed by economists such as Irving Fisher and later refined by Milton Friedman.

Given Constant Velocity and Output, the Notion That Prices Rise