In the long run, which of the following does the inflation rate primarily depend on?
A)the ability of unions to raise wages
B)government spending
C)the money supply growth rate
D)the monopoly power of firms

Question

Quizplus · Accepted Answer

Inflation is primarily caused by an increase in the money supply in an economy. As the money supply increases, the overall purchasing power of each unit of money decreases, leading to inflation. This increase in the money supply can be caused by various factors, including government policies, changes in bank lending practices, and the actions of the central bank. Therefore, the inflation rate primarily depends on the money supply growth rate. The other factors mentioned may also contribute to inflation, but they are not the primary drivers.

In the Long Run, Which of the Following Does the Inflation