According to the quantity theory of money, an increase in the money supply will lead to:
A. An increase in real GDP
B. An increase in real GDP, an increase in the price level, and an increase in velocity
C. Both an increase in real GDP and an increase in the price level
D. An increase in the price level
E. An increase in velocity
D. An increase in the price level
According to the quantity theory of money, an increase in the money supply will lead to a proportional increase in the price level. This is because when there is more money in circulation, individuals will have more purchasing power, leading to an increase in demand for goods and services. This increase in demand can result in higher prices as producers may raise prices to match the increased purchasing power of consumers.