If the money supply growth rate permanently increased from 5 percent to 30 percent,what would we expect to happen to inflation?
A) It would increase by more than 25 percentage points.
B) It would increase by 25 percentage points.
C) It would increase by less than 25 percentage points.
D) It would decrease by more than 25 percentage points.

Question

Quizplus · Accepted Answer

This is because inflation and money supply growth rate are directly related. With a 25% increase in the money supply growth rate, we would expect a 25% increase in inflation in the long run, all else equal.

If the Money Supply Growth Rate Permanently Increased from 5