If a high inflation rate leads people to _____ their money holdings, this may lead to a further increase in the money supply and _____ inflation.

Question

Quizplus · Accepted Answer

When people expect high inflation, they reduce their money holdings by spending more or lending their money to others. This leads to an increase in the velocity of money, which in turn leads to an increase in the money supply and a further increase in inflation. Therefore, reducing money holdings may lead to higher inflation.

If a High Inflation Rate Leads People to _____ Their