Over the long run and across countries,there is evidence of ________ between the growth rate of the money supply and the inflation rate.

Question

Quizplus · Accepted Answer

There is a strong link between the growth rate of the money supply and the inflation rate over the long run and across countries. As the money supply grows faster than the output, it leads to an increase in demand, which subsequently leads to an increase in prices or inflation. This relationship is known as the quantity theory of money. Therefore, an increase in the money supply growth rate tends to lead to a corresponding increase in the inflation rate.

Over the Long Run and Across Countries,there Is Evidence of ________