Other things constant, the quantity theory of money concludes that any increase in the quantity of money
A) decreases in the aggregate price level.
B) proportionally increases the price level.
C) decreases the demand for money.
D) decreases the aggregate level of nominal income.

Question

Quizplus · Accepted Answer

The quantity theory of money predicts that an increase in the quantity of money will lead to a proportionate increase in the price level, assuming that other factors such as the velocity of money and real output remain constant. This is expressed by the equation MV = PQ, where M is the quantity of money, V is the velocity of money, P is the price level, and Q is the quantity of goods and services produced. Therefore, any increase in M will result in an increase in PQ, which implies a proportional increase in P.

Other Things Constant, the Quantity Theory of Money Concludes That