2 The Quantity Theory of Money,cont. △M △Y π M -Normal economic growth requires a certain amount of money supply growth to facilitate the growth in transactions. Money growth in excess of this amount leads to inflation. CHAPTER 7 Money and Inflation slide 20 CHAPTER 7 Money and Inflation slide 20 The Quantity Theory of Money, cont. ▪ Normal economic growth requires a certain amount of money supply growth to facilitate the growth in transactions. ▪ Money growth in excess of this amount leads to inflation.    = − M Y M Y 2