If the monetary authorities persistently expand the money supply at a rapid rate, the probable result will be
A) inflation.
B) high nominal interest rates.
C) rapid growth of real GDP.
D) both a and b.

Question

Quizplus · Accepted Answer

Persistently expanding the money supply at a rapid rate typically leads to inflation (A) as more money chases the same amount of goods and services. High nominal interest rates (B) often follow as lenders demand higher rates to compensate for the decreased purchasing power of money.

If the Monetary Authorities Persistently Expand the Money Supply at a Rapid