What does the classical theory of inflation try to explain?
A)changes in relative prices in the economy determined by factors other than inflation
B)the effect of inflation on economic growth
C)the short-run determinants of the price level and the inflation rate
D)the long-run determinants of the price level and the inflation rate

Question

Quizplus · Accepted Answer

The classical theory of inflation explains the long-run determinants of the price level and the inflation rate, particularly the relationship between the money supply, price level, and economic growth. It suggests that the long-run inflation rate is primarily determined by the growth rate of the money supply in excess of the growth rate of potential output.

What Does the Classical Theory of Inflation Try to Explain