Large or persistent inflation is almost always caused by a. foreign competition. b. excessive growth in the quantity of money. c. higher-than-normal levels of productivity. d. excessive government spending.

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Mahoney

Business

11 March, 22:01

Large or persistent inflation is almost always caused by a. foreign competition. b. excessive growth in the quantity of money. c. higher-than-normal levels of productivity. d. excessive government spending.

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Korbin Valenzuela · Answer 1

The correct answer is letter "B": excessive growth in the quantity of money.

Explanation:

The Quantity Theory of Money claims that there is a direct relationship between the amount of money in an economy and the goods or services prices. Money should be treated any other commodity. Increases in the money supply reduce money's marginal value which causes persistent inflation. Under this scenario, consumers' buying power will decrease, so does the value of money.