When the growth in a country's money supply is faster than output increases,inflation is fueled.

Question

Quizplus · Accepted Answer

This is true because when there is more money in circulation than there are goods and services available for purchase, the demand for those goods and services increases, which leads to rising prices. This is known as demand-pull inflation. When the money supply growth rate exceeds the rate of output growth, it leads to excess demand, which causes inflation to rise.

When the Growth in a Country's Money Supply Is Faster