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Over short periods of time, there is a nearly perfect positive, linear relationship between money growth and inflation.
The quantity equation shows a strong relationship between the growth rates of money and inflation. Inflation is a monetary phenomenon that occurs worldwide, according to renowned economist Milton Friedman.
Always, "excessive" money expansion could be linked to inflation. Remember that we are discussing the long term in this conversation. Shorter-term changes in the money supply have a greater impact on the amount of actual economic activity and less of an impact on the inflation rate. In the short term of the US economy, the relationship between money growth and inflation is significantly closer. Money growth and inflation are correlated over a long period of time, not just temporarily.
As a result, the short-term impact of money expansion on national inflation is minimal. Less of an effect is positive, though. So, money growth and inflation have a nearly perfect positive linear relationship.
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