The classical theory of inflation illustrates the relationship between:
A)money supply,output,and the overall level of prices.
B)spending,saving,and the overall price level.
C)savings,investment,and the interest rate.
D)None of these statements is true.

Question

Quizplus · Accepted Answer

The classical theory of inflation focuses on the relationship between the money supply, output, and the overall level of prices. According to this theory, an increase in the money supply will lead to an increase in prices through the quantity theory of money. As more money chases the same amount of goods and services, prices will rise. Similarly, an increase in output will lead to a decrease in prices, as there are more goods and services available to purchase with the same amount of money.

The Classical Theory of Inflation Illustrates the Relationship Between