The quantity theory of money implies that a 7% increase in the ________ will eventually cause a 7% increase in the ________.
A) money demand; inflation rate
B) money demand; money supply
C) money supply; price level
D) money supply; money demand

Question

Quizplus · Accepted Answer

The quantity theory of money states that the price level is directly proportional to the money supply. Therefore, a 7% increase in the money supply will eventually cause a 7% increase in the price level.

The Quantity Theory of Money Implies That a 7% Increase