Question

If the money supply is MS2 and the value of money is 5, then the quantity of money an. demanded is greater than the quantity supplied; the price level will rise. b. demanded is greater than the quantity supplied; the price level will fall. c. supplied is greater than the quantity demanded; the price level will fall. d. supplied is greater than the quantity demanded; the price level will rise.

Answer 1

Answer:

If the money supply is MS2 and the value of money is 5, then the quantity of money

a. demanded is greater than the quantity supplied; the price level will rise.

Explanation:

If the money supplied is greater than the quantity demanded; the price level will fall.  The quantity theory of money, popularized by Irving Fisher but developed by John Maynard Keynes, states that the value of money is influenced by the forces of demand and supply.  This theory implies that money supply and price level proportionally influence each other.