An increase in the expected inflation rate causes:
A)the velocity of money to increase.
B)the velocity of money to decrease.
C)the actual inflation rate to fall.
D)the actual price level to decrease.
E)the money supply to increase.

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate leads people to spend their money more quickly, thinking that prices will rise soon, which causes an increase in the velocity of money.

An Increase in the Expected Inflation Rate Causes