Comparisons of the link between the growth of the money supply and inflation indicate that
A) countries with high rates of monetary growth also experience high inflation.
B) countries with high rates of monetary growth experience low inflation.
C) monetary growth rates and inflation are unrelated.
D) inflation is primarily the result of restrictive monetary policy.

Question

Quizplus · Accepted Answer

Studies and historical data have consistently shown that there is a positive correlation between the growth of the money supply and inflation. When a central bank increases the money supply excessively, it can lead to an oversupply of money in the economy, causing an increase in spending and ultimately driving up prices. Therefore, countries with high rates of monetary growth tend to experience high inflation.

Comparisons of the Link Between the Growth of the Money