Why Could Very High Rates of Inflation Cause Velocity to Increase

question 102

Multiple Choice

Why could very high rates of inflation cause velocity to increase?

• A) The more that people earn, the faster they spend it.
• B) People try to spend their money before it loses too much value.
• C) The more that people spend, the faster prices rise.
• D) None of the answers is correct.

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Definitions:

Harmful Chemicals

Substances that have the potential to cause damage to living organisms or the environment through exposure, inhalation, ingestion, or skin absorption.

Technology Spillovers

The positive externality that occurs when technological advancements or innovations benefit firms or sectors beyond the inventor or innovator.

Industrial Policy

Government-driven programs and policies aimed at improving the competitiveness and capabilities of domestic industries and sectors.

Subsidies

Financial assistance provided by the government to individuals or businesses to support economic activities deemed beneficial for the public.