The money supply rises from $1,800 billion to $1,908 billion.According to the simple quantity theory of money,the price level will ___________ by __________ percent.

Question

Quizplus · Accepted Answer

The simple quantity theory of money suggests that if the money supply increases, the price level will also increase, assuming velocity and real output remain constant. The percentage increase in the money supply is calculated as (1908 - 1800) / 1800 * 100 = 6%. Therefore, the price level will rise by 6 percent.

The Money Supply Rises from $1,800 Billion to $1,908 Billion