2 The Quantity Theory of Money A simple theory linking the inflation rate to the growth rate of the money supply. Begins with a concept called "velocity". CHAPTER 7 Money and Inflation slide 12CHAPTER 7 Money and Inflation slide 12 The Quantity Theory of Money ▪ A simple theory linking the inflation rate to the growth rate of the money supply. ▪ Begins with a concept called “velocity”. 2