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Using appropriate online resources, document graphically the link between money growth and inflation. Does the evidence...

Using appropriate online resources, document graphically the link between money growth and inflation. Does the evidence support the economists’ assertion of why economist believe that inflation in the long run is entirely a monetary phenomenon ? Why or why not?

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Answer #1

Inflation in long run is always based on monetary phenomenon because of money supply injected in market. Through expansionary monetary policy tools like decrease in interest rate, purchase of government securities or lower reserves requirements the money supply and liquidity is injected which causes aggregate demand to rise and hence consumption gets boost. However its notable that quantity of money injected is more impactful.

This eventually rises prices and hence inflation shoots.

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