Which of the following rates of growth in the money supply is likely to lead to the highest level of inflation in the economy?
A)1 percent per year
B)2 percent per year
C)3 percent per year
D)4 percent per year

Question

Quizplus · Accepted Answer

The higher the rate of growth in the money supply, the more money will be circulating in the economy, leading to an increase in demand for goods and services. This increase in demand can lead to higher prices and, therefore, inflation. Of the options given, a growth rate of 4 percent per year is the highest and thus has the highest potential for inflation.

Which of the Following Rates of Growth in the Money