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Question
Statistics
Posted 10 months ago
According to monetarists, what is the primary cause of inflation?
Choose 1 answer:
(A) The money supply increases faster than real output increases
(B) The money supply decreases too rapidly for a long time
(c) A stable velocity of money
(D) A rapidly changing velocity of money
(E) Any increase in the money supply
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Answer from Sia
Posted 10 months ago
Solution by Steps
step 1
Identify the monetarist view on inflation: Monetarists, such as Milton Friedman, argue that inflation is always and everywhere a monetary phenomenon
step 2
Analyze the answer choices in relation to the monetarist view: Monetarists believe that inflation is caused by an increase in the money supply that outpaces the increase in real output
step 3
Match the monetarist view with the given answer choices: Answer choice A aligns with the monetarist theory that inflation occurs when the money supply increases faster than real output
Answer
A
Key Concept
Inflation and Money Supply
Explanation
According to monetarists, the primary cause of inflation is an increase in the money supply that exceeds the growth of real output.
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