According to the quantity theory of money, increasing the money supply:
A) leads to inflation.
B) causes production to increase.
C) leads to decreased spending.
D) causes each dollar to be spent less often.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, when the money supply is increased, the amount of money chasing the same amount of goods and services increases, leading to a decrease in the purchasing power of money and therefore, higher prices or inflation.

According to the Quantity Theory of Money, Increasing the Money