A cross-country analysis of money growth supports the conclusion that:
A) there is no correlation between the growth rate of the quantity of money and the rate of inflation.
B) the correlation between the money growth rate and inflation in most countries was positive but very small.
C) the correlation between inflation and money growth in most industrialized countries was actually negative.
D) the correlation between inflation and the money growth rate was positive and relatively strong.

Question

Quizplus · Accepted Answer

Numerous studies and empirical evidence have shown that there is a positive and relatively strong correlation between the growth rate of the quantity of money and the rate of inflation across different countries. This relationship is consistent with the quantity theory of money, which posits that an increase in the money supply, if not matched by an increase in the production of goods and services, leads to inflation.

A Cross-Country Analysis of Money Growth Supports the Conclusion That