A rate of inflation that exceeds the growth rate of money for a country could be explained by:

Question

Quizplus · Accepted Answer

An increasing velocity of money means that people are spending money faster, which puts upward pressure on prices and could cause inflation to exceed the growth rate of money. A growing real economy (choice A) could cause inflation, but it would likely also lead to an increase in the growth rate of money that would keep inflation in check. A constant velocity of money (choice B) would not explain why inflation is exceeding the growth rate of money. A decreasing velocity of money (choice D) would actually help to reduce inflation, as people are spending money more slowly and there is therefore less upward pressure on prices.

A Rate of Inflation That Exceeds the Growth Rate of Money