The U.S. historical evidence
A) demonstrates that there is no correlation between the money growth rate and inflation.
B) shows that a higher inflation rate causes an increase in the money growth rate.
C) does not support the quantity theory of money.
D) generally supports the quantity theory of money in the long run.

Question

Quizplus · Accepted Answer

The U.S. historical evidence generally supports the quantity theory of money in the long run, which suggests that changes in the money supply affect changes in the price level. However, there can be short-run fluctuations where the relationship may not hold, and historical evidence also shows that other factors such as supply and demand shocks, technological changes, and policy decisions can also affect inflation.

The U.S. Historical Evidence