Cross country data illustrates that rapid expansion in the supply of money over a lengthy period of time (for example, a decade) leads to
A) rapid growth of real output.
B) a low real rate of interest.
C) high rates of inflation.
D) an inflow of capital and a high rate of investment.

Question

Quizplus · Accepted Answer

When there is a rapid expansion in the supply of money over a lengthy period of time, it often leads to high rates of inflation. This is because an increase in the supply of money without a corresponding increase in the supply of goods and services leads to higher prices.

Cross Country Data Illustrates That Rapid Expansion in the Supply