In context of the equation of exchange, which of the following is most likely to bring inflation, ceteris paribus?
a) a slight decline in velocity
b) increase in the money supply
c) increase in Q
d) none of the above
1
Expert's answer
2014-12-03T11:25:11-0500
In context of the equation of exchange MV = PY, so inflation (or increase in the price level) may be caused by the increase in the money supply, ceteris paribus. That's why, as increase in the money supply is most likely to bring inflation, the right answer is b) increase in the money supply
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