Question

The theory that too much money in the economy causes inflation is referred to as the

Answer 1

Answer:

Classical inflation theory, also known as quantitative theory of money.

Explanation:

In economics, several theories try to explain what generates inflation. One is the quantitative theory of money. Also called the classical theory, the quantitative theory of money is associated with a strand of economists called monetarists.

The quantitative theory of money relates to inflation the amount of money in an economy. According to theory, the amount of money available determines the price level in an economy. And in turn, the growth rate of the amount of money determines the rate of inflation.

Within this view, there is a balance between money supply and demand in an economy at a given productive level. If there is a change in this supply and demand for money without changes in the productive capacity of this economy there will be a price change.