Question

Imagine a scenario in which an international counterfeiting ring prints enough U.S. dollars to increase the nation’s quantity of money by 10 percent. Then the news media breaks the story wide open and makes the details known to the public. Assuming that the government is not able to rid the economy of this counterfeit money and it is for all intents and purposes untraceable, discuss what happens in the long run if the counterfeiting is a one-time episode or if the counterfeiting is ongoing so that each year the quantity of money grows by an additional 10 percent.

Answer 1