What does the quantity theory of money try to explain?
A) how inflation determines economic growth
B) the relationship between the quantity of money and the price level
C) the determinants of relative prices in the economy
D) the relationship between inflation and unemployment

Question

Quizplus · Accepted Answer

The quantity theory of money attempts to explain the relationship between the quantity of money in an economy and the price level. It suggests that an increase in the supply of money will lead to a proportional increase in the price level, assuming all other factors remain constant.

What Does the Quantity Theory of Money Try to Explain