Rapid growth in M2 is likely to lead to ________.
A) high levels of inflation
B) high real interest rates
C) low levels of investment
D) a low demand for labor

Question

Quizplus · Accepted Answer

Rapid growth in M2, which refers to the total amount of money in circulation and in bank accounts, is likely to lead to high levels of inflation as there is more money chasing the same amount of goods and services, leading to a decrease in purchasing power. This, in turn, can also lead to higher interest rates as central banks try to curb inflation by raising rates to reduce spending and control inflation.

Rapid Growth in M2 Is Likely to Lead to ________