According to the quantity theory of money,if the economy were facing inflation,the Fed could combat it by:
A)decreasing the supply of money.
B)increasing the supply of money.
C)cutting taxes.
D)increasing taxes.

Question

Quizplus · Accepted Answer

The quantity theory of money states that inflation is caused by too much money chasing too few goods. Therefore, to combat inflation, the Fed would need to decrease the supply of money in order to decrease the amount of money available to purchase goods and services. This would result in a decrease in demand, which would lower prices and combat inflation.

According to the Quantity Theory of Money,if the Economy Were