The expectation of greater inflation resulting from the government's creation of money to finance budget deficits often results in a:
A)higher nominal demand for goods.
B)lower money velocity.
C)less inflationary pressure.
D)less rapid money growth.

Question

Quizplus · Accepted Answer

When people expect higher inflation due to government actions like creating money to finance deficits, they tend to spend more quickly, increasing the nominal demand for goods.

The Expectation of Greater Inflation Resulting from the Government's Creation