The money supply falls from $1,200 billion to $1,152 billion.According to the simple quantity theory of money,the price level will decline by __________ percent.

Question

Quizplus · Accepted Answer

The simple quantity theory of money states that the price level is directly proportional to the money supply. Therefore, if the money supply falls by 4%, the price level will also fall by 4%.

The Money Supply Falls from $1,200 Billion to $1,152 Billion