Based on the quantity theory of money, hyperinflations are most likely caused by a rapid
A) increase in the growth of the money supply.
B) decrease in the price level.
C) increase in real GDP.
D) decrease in the money supply.

Question

Quizplus · Accepted Answer

The quantity theory of money states that the price level is directly proportional to the money supply and the velocity of money while being inversely proportional to the real GDP. Therefore, hyperinflations, which are a rapid and uncontrollable increase in the price level, are most likely caused by a rapid increase in the growth of the money supply.

Based on the Quantity Theory of Money, Hyperinflations Are Most