The quantity theory of money asserts that inflation is the result of growth in
A) the natural rate of unemployment.
B) money wage rates.
C) the quantity of money.
D) potential GDP.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, inflation is primarily caused by an increase in the quantity of money in circulation. This is because when there is more money in the economy, people have more purchasing power which leads to an increase in demand for goods and services. This increase in demand leads to a rise in prices, causing inflation. Therefore, choice C is the best option.

The Quantity Theory of Money Asserts That Inflation Is the Result