What is Quantity Theory of Money, how it effects business.

 Quantity Theory of Money and how it effects business?

Quantity theory of Money can be explained by the fact which shows the relationship between increase money supply and the increase in prices of various items and services accordingly.This theory defines the reason of increase in prices of products and services in the country which happens when the money supply in the economy increases.

In other words when the money supply increases,there will be large volume of money in the economy as well as in the market then more people access more money which results the increase in price level of the goods and services available in the market.

This theory can affect the business in two ways positively and negatively.Positively, the products or the services of the company could earn handsome profit because of increase in prices and Negatively, there may be the chances that products or the services demand decreases due to lower income of majority in the country.