In countries with low inflation:
A) M2 growth is a very strong forecaster of inflation.
B) there tends to be a greater reliance on checks than electronic payments.
C) M2 growth is a poor forecaster of inflation.
D) money stocks are a larger percentage of GDP.

Question

Quizplus · Accepted Answer

In countries with low inflation, M2 growth is not a good predictor of future inflation as the relationship between money supply and inflation is weak. Therefore, Option C is the correct answer. Option A is incorrect because M2 growth is not a strong forecaster of inflation in countries with low inflation. Option B is incorrect because countries with low inflation tend to have a higher adoption of electronic payments rather than relying on checks. Option D is also incorrect because low inflation countries are generally characterized by lower money stocks as a percentage of GDP.

In Countries with Low Inflation