The primary cause of inflation is
A) large budget deficits.
B) high taxes.
C) rapid expansion of the money supply.
D) government expenditures that are large relative to the size of the economy.

Question

Quizplus · Accepted Answer

Inflation occurs when there is too much money chasing too few goods and services. When the money supply is rapidly expanded, its value decreases and prices rise, causing inflation. Large budget deficits, high taxes, and government expenditures may contribute to inflation indirectly, but the primary cause is the expansion of the money supply.

The Primary Cause of Inflation Is