The expansion of the money supply at a rate that exceeds the increase in goods and services will likely result in ________.
A) expanding economy
B) increased inflation
C) interest rate declines
D) lower GDP

Question

Quizplus · Accepted Answer

When the money supply grows faster than the increase in goods and services, it creates a situation of "too much money chasing too few goods". As a result, the demand for goods and services increases but the supply remains the same, leading to an increase in prices, i.e., inflation. Therefore, option B is the correct answer.

The Expansion of the Money Supply at a Rate That