Question

A very strong relationship exists between the Money Supply and Prices. Which of the following describes this relationship?
A. An increase in the Aggregate Price Level causes an increase in the Money Supply.
B. An increase in the Money Supply causes a decrease in the Aggregate Price Level.
C. An increase in the Money Supply causes an increase in the Aggregate Price Level.

Answer 1

the answer to your question is b

Answer 2

The option that describes this relationship is  An increase in the Money Supply causes a decrease in the Aggregate Price Level.

What kind of relationship exists between money supply and value of money?

An increase in the money supply is said to lead to a decrease in the value of money.

This is because an increase in the money supply is one that leads to increase in the rate of inflation and as such, purchasing power decreases.

Therefore, The option that describes this relationship is  An increase in the Money Supply causes a decrease in the Aggregate Price Level.

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