If Money supply growth is faster than real GDP growth, it results in .................

Q. If Money supply growth is faster than real GDP growth, it results in ……………..

A

Inflation

B

deflation

C

budget surplus

D

budget deficit

Solution:

Based on the Quantum Theory of Money,

If the money supply grows at the same rate as output, the price level will be stable.

If the money supply grows faster than output, the economy will experience inflation.

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