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Economics (AS & A Level) · Oct / Nov 2025 · Paper 31 · Question 14

9708Money and banking

Which statement about the quantity theory of money is correct?

  1. AIt suggests changes in liquidity preference lead to proportional changes in the price level.
  2. BIt suggests changes in the money supply lead to proportional changes in the price level.
  3. CIt suggests changes in the price level lead to proportional changes in liquidity preference.
  4. DIt suggests changes in the price level lead to proportional changes in the money supply.

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Correct answer: B. It suggests changes in the money supply lead to proportional changes in the price level.

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