Which of the following determines the rate of inflation in the long run?
I. the rate of money growth
II. changes in expectations about the price level
III. the rate of economic growth
IV. changes in government spending
A) I and II only
B) I and III only
C) I, II, and III only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

In the long run, the rate of inflation is primarily determined by the rate of economic growth (as increased economic activity puts upward pressure on prices) and the rate of money growth (as a larger money supply leads to more spending and higher prices). Changes in expectations about the price level and changes in government spending can have short-term effects on inflation but do not have as much of a long-term impact.

Which of the Following Determines the Rate of Inflation in the Long