Asked by Abigail Rodefer on May 16, 2024
Verified
Which of the following is consistent with the idea that high money supply growth leads to high inflation?
A) The quantity theory and data from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.
B) The quantity theory but not evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.
C) Evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland but not the quantity theory.
D) Neither the quantity theory nor evidence from classic hyperinflations that occurred during the 1920s in Austria, Hungary, Germany, and Poland.
Money Supply Growth
Refers to the rate at which the amount of money in circulation within an economy increases over a specific period of time.
Hyperinflations
Extremely high and typically accelerating inflation rates, often exceeding 50% per month.
- Leverage the quantity theory of money to foresee outcomes on nominal and real GDP caused by modifications in the money supply.
Verified Answer
SQ
Sister Quin JonesMay 18, 2024
Final Answer :
A
Explanation :
The quantity theory of money, which posits a direct relationship between the amount of money in an economy and the level of prices of goods and services, supports the idea that high money supply growth leads to high inflation. This theory is further corroborated by historical data from classic hyperinflations in the 1920s in countries like Austria, Hungary, Germany, and Poland, where massive increases in the money supply led to extremely high inflation rates.
Learning Objectives
- Leverage the quantity theory of money to foresee outcomes on nominal and real GDP caused by modifications in the money supply.