The evidence from hyperinflations indicates that money growth and inflation
A)are positively related,which is consistent with the quantity theory of money.
B)are positively related,which is not consistent with the quantity theory of money.
C)are not related in a discernible fashion,which is consistent with the quantity theory of money.
D)are not related in a discernible fashion,which is not consistent with the quantity theory of money.

Question

Quizplus · Accepted Answer

The evidence from hyperinflations, such as those in Zimbabwe and Venezuela, indicates a positive relationship between money growth and inflation. This is consistent with the quantity theory of money, which suggests that the price level is directly proportional to the money supply, ceteris paribus. In hyperinflations, the rapid increase in the money supply leads to a rapid increase in prices. Therefore, the best choice is A.

The Evidence from Hyperinflations Indicates That Money Growth and Inflation