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    Question

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

    money supply will increase inflation by:┬а
    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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