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"The Rigid Link Between Monetary Growth and Inflation

Question 78

Multiple Choice

"The rigid link between monetary growth and inflation . . . had been broken." M1 grew faster in the deflationary 1980s than in the inflationary 1970s. Why?


A) the demand for money increased, reducing spending
B) the demand for money decreased, due to financial deregulation
C) the demand for money increased, as did velocity
D) the demand for money decreased and the Fed targeted the money supply

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