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      Question

      An increase of 1% per annum in the growth rate of the

      money supply will increase inflation by:Β 
      A 0% Correct Answer Incorrect Answer
      B 1% Correct Answer Incorrect Answer
      C 0.5% Correct Answer Incorrect Answer
      D more than 1% Correct Answer Incorrect Answer

      Solution

      In the long run, an increase in the money supply typically leads to a proportional increase in the inflation rate, as more money chases the same amount of goods.

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