According to the tenets of monetary theory, which of the following is a prescription for reducing inflation?
A) If less money is available, price increases will slow and the inflationary spiral will end.
B) Credit can be eased by lowering interest rates, thus allowing the supply of money to grow quickly.
C) Increased federal spending will spur economic expansion, reduce unemployment, and increase personal spending.
D) Reduced federal taxes will give consumers more buying power.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, inflation occurs when there is too much money chasing too few goods. Therefore, reducing the supply of money will lead to a decrease in inflation. Option A suggests that less money available will slow down price increases and bring an end to the inflationary spiral.

According to the Tenets of Monetary Theory, Which of the Following