Increases in the money supply will not necessarily cause inflation if the increase in the money supply is offset by

Question

Quizplus · Accepted Answer

The velocity of money refers to how quickly money is changing hands in the economy. If the velocity of money falls, it means that people are holding onto their money instead of spending it, which can offset the increase in the money supply and prevent inflation. Therefore, option A is the best choice as a falling velocity of money can mitigate inflation even if the money supply increases.

Increases in the Money Supply Will Not Necessarily Cause Inflation