It is often said that inflation is a "monetary phenomenon." The most accurate interpretation of this phrase is that

Question

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This statement implies that in order for inflation to persist, there must be a continuous increase in the money supply. In other words, sustained inflation is caused by a cycle of increasing money supply leading to higher prices, which require even more money supply to maintain. It does not necessarily mean that inflation cannot start from other factors, such as supply shocks or changes in expectations, but these factors alone cannot cause persistent inflation without a corresponding increase in the money supply.

It Is Often Said That Inflation Is a "Monetary Phenomenon