When the money supply nearly tripled after the 2007-2009 financial crisis, inflation:
A) began to spiral out of control due to the newfound solvency of banks, increasing lending and thus the money multiplier effect.
B) continued to fall due to the lack of consumer confidence in the market, decreasing the marginal propensity to consume.
C) stayed relatively low due to the lack of lending by banks, reducing the effectiveness of the money multiplier.
D) slowly increased due to restored consumer confidence in the market, increasing the marginal propensity to consume.
Correct Answer:
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