According to the quantity equation, the cure for hyperinflation is:
A) higher taxes.
B) reducing government spending.
C) reducing money growth.
D) All of these answers are correct.
E) None of these answers is correct.

Question

Quizplus · Accepted Answer

The quantity equation (MV = PQ) states that the price level (P) is directly proportional to the quantity of money (M) and the velocity of money (V), and is inversely proportional to the quantity of goods and services produced (Q). Therefore, to bring down the price level and control hyperinflation, the growth rate of money supply (M) must be reduced. Higher taxes and reducing government spending may also be necessary to stabilize the economy, but they are not the direct solution to hyperinflation.

According to the Quantity Equation, the Cure for Hyperinflation Is