High Inflation (Scenario)
Country X primarily exports coffee beans, and in the last two years the demand for coffee beans has caused economic growth in Country X. To accommodate the economic growth, the central bank of Country X increased the nation's money supply. Country X is now experiencing inflation of over 200 percent. A group of economic experts, government representatives, and business owners have gathered for a conference in Country X to discuss the situation.
-Which of the following questions would be more important to evaluate in determining the reason behind the inflation in Country X?
A) Has momentum trading of agricultural commodities been occurring in Country X?
B) What is the exchange rate between Country X currency and the euro?
C) How quickly was the money supply increased by the central bank of Country X?
D) How many pounds of coffee beans are being imported annually to Country X?

Question

Quizplus · Accepted Answer

The rapid increase in the money supply by the central bank is a direct factor that can lead to inflation, as it increases the amount of money in circulation without a corresponding increase in goods and services, thus driving prices up.

High Inflation (Scenario) Country X Primarily Exports Coffee Beans, and in the Last