In quantity theory terms,during a hyperinflation
A) money supply increases rapidly, but velocity does not.
B) velocity increases rapidly, but money supply does not.
C) both the money supply and velocity increase rapidly.
D) neither the money supply nor velocity increase rapidly.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, the price level (inflation) is a function of the money supply and velocity of money. During hyperinflation, the money supply is typically printed at an extreme rate, leading to a rapid increase in the money supply. However, people tend to try to spend their money as quickly as possible during a hyperinflation due to the rapidly decreasing value of money, leading to a rapid increase in the velocity of money. Therefore, both the money supply and velocity increase rapidly during hyperinflation.

In Quantity Theory Terms,during a Hyperinflation