According to modern analysis, what is the link between the long-run growth rate of the money supply and inflation?
A) there is little correlation between money growth and inflation
B) there is a positive link between money growth and inflation, contrary to the quantity theory of money
C) there is a strong, positive link between rapid money growth and inflation
D) there is an inverse relationship between rapid money growth and inflation

Question

Quizplus · Accepted Answer

Modern analysis suggests that there is a strong, positive link between rapid money growth and inflation. This is in line with the idea that an increase in the money supply leads to an increase in demand for goods and services, driving up their prices. The quantity theory of money also supports this idea, stating that the price level is directly proportional to the money supply, when all other factors are held constant.

According to Modern Analysis, What Is the Link Between the Long-Run