ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in the rate of inflation will cause the demand for money to increase.
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True
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False
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -Changes in the price level (inflation or deflation) When there is an increase in the price level, the demand for money increases. Conversely, when there is a decrease in the price level, the demand for money decreases.
Detailed explanation-2: -Understanding How Money Supply Affects Inflation When the Fed increases the money supply faster than the economy is growing, inflation occurs. In this situation, the increase in money circulating in an economy is higher than the increase in goods produced.
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