According to the quantity theory of money, if there are fewer dollars available to spend on the same number of goods and services, then:
A) the price level will fall.
B) the price level will rise.
C) output will decrease.
D) output will increase.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, there is a direct relationship between the supply of money and the price level. If the supply of money decreases and the demand for goods and services in the economy stays the same, then there will be fewer dollars available to spend on the same number of goods and services, leading to a decrease in the price level. Therefore, the correct answer is A: the price level will fall.

According to the Quantity Theory of Money, If There Are