Why could very high rates of inflation cause velocity to increase?
A) The more that people earn, the faster they spend it.
B) People try to spend their money before it loses too much value.
C) The more that people spend, the faster prices rise.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

When prices are rapidly increasing due to high inflation, people have an incentive to spend their money as quickly as possible before it loses too much value. This increased spending leads to an increase in the velocity of money.

Why Could Very High Rates of Inflation Cause Velocity to Increase