Country data from the time period known as the great inflation indicate that when a country has high rates of growth in output, then changes in the money supply have:
A) a stronger impact on inflation.
B) less impact on inflation.
C) less impact on velocity.
D) more impact on velocity.

Question

Quizplus · Accepted Answer

When a country experiences high rates of growth in output, the economy can absorb increases in the money supply without necessarily experiencing proportional increases in inflation. This is because the growing economy demands more transactions, which can be facilitated by the increased money supply without leading to an immediate rise in prices.

Country Data from the Time Period Known as the Great