When continued for several years, rapid growth in the money supply relative to the growth of real output will likely lead to an extended period of
A) low unemployment.
B) high inflation.
C) low nominal interest rates.
D) high rates of real economic growth.

Question

Quizplus · Accepted Answer

When the growth rate of the money supply is higher than the growth rate of real output, it leads to an increase in the aggregate demand in the economy, resulting in rising prices or inflation. This can lead to a decrease in the value of money, which can further accelerate inflation. Therefore, an extended period of rapid growth in the money supply relative to real output tends to lead to high inflation.

When Continued for Several Years, Rapid Growth in the Money