Multiple choice

Which of the following statement is not completely true?

  1. An increase in the supply of money will result in inflation

  2. Cost inflation occurs when prices rise to cover increased factor costs

  3. Inflation occurs when the value of money declines

  4. Inflation will have the effect of redistributing incomes within a country
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A Correct answer
Explanation

While an increase in money supply is a significant factor that can lead to inflation, it is not an automatic or complete guarantee. Inflation also depends on other critical factors such as the velocity of money, the level of output, and consumer demand. The statement oversimplifies the complex relationship between money supply and inflation.

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