It has been shown that increases in the money supply are directly related to the rate of inflation.If the previous statement is true,then
A) nations that increase their money supplies most rapidly will be the most prosperous.
B) hyperinflation will normally be associated with large increases in the money supply.
C) hyperinflation will normally be associated with large decreases in the money supply.
D) menu costs will rise when the money supply falls.
E) real wages rise whenever the money supply increases.

Question

Quizplus · Accepted Answer

The statement indicates that there is a direct relationship between increases in the money supply and inflation. This means that if a nation increases its money supply too rapidly, it can lead to an increase in the rate of inflation. If the increase is large enough, it can lead to hyperinflation, which is associated with rapid and excessive increases in the money supply. Therefore, option B is the correct choice.

It Has Been Shown That Increases in the Money Supply