Read the following statements and determine if they are true or false.
I. According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run.
II. Historical and international data show that there is no correlation between inflation and money growth.
A) I is true and II is false.
B) I and II are both true.
C) I and II are both false.
D) I is false and II is true.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, an increase in the growth rate of the quantity of money increases inflation in the long run, which makes statement I true. However, statement II is false. Historical and international data show that there is a correlation between inflation and money growth, meaning as money supply increases, inflation tends to increase as well.

Read the Following Statements and Determine If They Are True