Read the following statements and determine if they are true or false.
I. According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run.
II. Historical and international data show that there is no correlation between inflation and money
Growth.
A) I and II are both true.
B) I and II are both false.
C) I is true and II is false.
D) I is false and II is true.

Question

Quizplus · Accepted Answer

I is true because the quantity theory of money suggests that an increase in the money supply leads to proportional increases in prices in the long run. II is false because empirical evidence generally supports a strong correlation between the growth rate of money supply and inflation.

Read the Following Statements and Determine If They Are True