According to the quantity theory of money, an increase in the quantity of money
A) increases average prices.
B) increases velocity.
C) increases real GDP.
D) does all of the above.
E) does none of the above.

Question

Quizplus · Accepted Answer

The quantity theory of money states that the price level is directly proportional to the quantity of money in circulation. Therefore, an increase in the quantity of money will increase average prices.

According to the Quantity Theory of Money, an Increase in the Quantity