An increase in the growth rate of the nominal money supply results in _________.
- ALower rate of inflation
- BHigher rate of inflation
- CLower interest rates
- DCurrency appreciation
Solution & Step-by-step Explanation
According to the quantity theory of money, an increase in the growth rate of the nominal money supply leads to an excess supply of money relative to the demand for goods and services. This drives up aggregate prices, leading directly to a higher rate of inflation.