Ceteris paribus,the greater the increase in the money supply,the __________ the inflation rate,the __________ the expected inflation rate,and the __________ the interest rate.

Question

Quizplus · Accepted Answer

Ceteris paribus, when the money supply increases significantly, it typically leads to higher inflation because more money chases the same amount of goods and services, which can also lead to higher expected inflation as people anticipate this trend to continue. Consequently, interest rates may rise as lenders demand higher returns to compensate for the decreased purchasing power of money over time.

Ceteris Paribus,the Greater the Increase in the Money Supply,the __________