According to the quantity theory of money, money growth and inflation are
A) negatively correlated.
B) positively if the inflation rate is positive and negatively correlated if the inflation rate is negative.
C) positively correlated.
D) independent, that is, not correlated.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, money growth and inflation are positively correlated. This is because an increase in the money supply leads to an increase in aggregate demand, which in turn leads to an increase in prices.

According to the Quantity Theory of Money, Money Growth and Inflation