When we analyze the relationship between inflation and the money supply, we assume
A) all other factors that affect the rate of inflation remain constant.
B) this relationship holds only in a democratic country.
C) this relationship reflects a nonlinear relationship.
D) the money supply is backed by gold alone.

Question

Quizplus · Accepted Answer

The relationship between inflation and the money supply is based on the assumption that all other factors affecting inflation remain constant. This allows us to isolate the effect of changes in the money supply on inflation. The other options are not relevant to this relationship.

When We Analyze the Relationship Between Inflation and the Money