The price level rises if either
A)money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a rise in the value of money.
B)money demand shifts rightward or money supply shifts leftward;this rise in the price level is associated with a fall in the value of money.
C)money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a rise in the value of money.
D)money demand shifts leftward or money supply shifts rightward;this rise in the price level is associated with a fall in the value of money.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the price level is directly proportional to the money supply, and inversely proportional to money demand. Therefore, if money demand shifts leftward or money supply shifts rightward, there will be a decrease in the price level and an increase in the value of money. Conversely, if money demand shifts rightward or money supply shifts leftward, there will be an increase in the price level, and a fall in the value of money.

The Price Level Rises If Either