Which of the following determines the rate of inflation in the long run?
I. the rate of money growth
II. changes in expectations about the price level
III. the rate of economic growth
IV. changes in government spending

Question

Which of the following determines the rate of inflation in the long run? 
I. the rate of money growth
II. changes in expectations about the price level
III. the rate of economic growth
IV. changes in government spending

Quizplus · Accepted Answer

In the long run, the rate of inflation is primarily determined by the rate of economic growth (III) and the rate of money growth (I). Changes in expectations about the price level (II) may affect inflation in the short run but do not have a sustained impact in the long run, and changes in government spending (IV) may have an impact on the demand for goods and services but are not a direct determinant of the rate of inflation.

Which of the Following Determines the Rate of Inflation in the Long