What does the quantity theory of money suggest occurs with a 6% change in the money supply?

The quantity theory of money, often expressed through the equation of exchange (MV = PY), illustrates the relationship between money supply (M), velocity of money (V), price level (P), and real output (Y). According to this theory, if the money supply increases by a certain percentage and assuming velocity is constant, the price level will also change by that same percentage.

In this case, a 6% increase in the money supply indicates that the price level is expected to rise by 6%, provided that the velocity of money and real output remain stable. This stems from the assumption that any changes in the money supply will directly translate into changes in the price level when other factors are held constant.

The reasoning behind this is grounded in the belief that more money in the economy leads to higher spending capability, which in turn increases demand for goods and services, thereby driving up prices. As such, the quantity theory emphasizes the direct correlation between changes in the money supply and the price level, making the assertion of a 6% change in the price level the most accurate outcome of a 6% change in the money supply.

This interpretation aligns perfectly with classical economic views, where long-term fluctuations in the money supply predominantly affect the price level