Which of the following would provide the strongest evidence that rapid money growth is the driving force behind inflation?
A)An endogenous increase in the money supply that preceded the onset of inflation.
B)An exogenous increase in the money supply that preceded the onset of inflation.
C)An endogenous increase in the money supply that lagged the onset of inflation.
D)An exogenous increase in the money supply that lagged the onset of inflation.

Question

Quizplus · Accepted Answer

An exogenous increase in the money supply that preceded the onset of inflation would provide the strongest evidence that rapid money growth is the driving force behind inflation. This is because an exogenous increase in the money supply, which is not driven by economic fundamentals or market forces, would directly lead to an increase in aggregate demand and prices. Conversely, endogenous increases in the money supply or increases that lag the onset of inflation may be driven by other economic factors and may not necessarily be the primary cause of inflation.

Which of the Following Would Provide the Strongest Evidence That