(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation

Business

1 answer:

Digiron [165]2 years ago

8 0

Answer:

The quantity theory of money defends that the money supply has a determining influence on the price level, that is, that the quantity of circulating money will necessarily be imputed to the value of the quantity of commercial operations that are carried out.

Therefore, this theory establishes that the creation of money without increasing the commercial volume (the total amount of tradable goods) will lead to inflation, since it is not really increasing the economic value of an economy, but only the money supply of it, which is "empty" of value, and therefore is coupled with existing commercial transactions.

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(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation​

(a) Explain the quantity theory and (b) how does the theory explains the cause of inflation