In the real world, countries that have faster money growth over the long run tend to...

In the real world, countries that have faster money growth over the long run tend to have

a	lower government budget deficits over the long run
b	higher inflation over the long run
c	lower inflation over the long run
d	lower nominal interest rates over the long run

Expert Solution

An increased money supply typically raises the aggregate demand through a fall in the rate of interest. An increased aggregate demand for goods and services relative to aggregate supply will increase the price level in shortrun. An increased price level raises the factor prices in longrun. Thus the net result of an increased money growth in an economy is higher inflation is longrun.

Answer: b. higher inflation over the longrun.

Rahul Sunny answered 2 years ago

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