Question : The study of how changes in the money supply affect inflation is an example of:
Option 1: Behavioral economics
Option 2: Monetary economics
Option 3: Development economics
Option 4: Urban economics
Correct Answer: Monetary economics
Solution : The correct answer is (b) Monetary economics.
Monetary economics is a branch of economics that focuses on the role of money in the economy and the effects of monetary policy. It analyzes the behavior of central banks, the impact of changes in the money supply, interest rates, and other monetary variables on various economic factors, including inflation. Monetary economics examines how changes in the money supply, through mechanisms such as money creation, open market operations, and interest rate adjustments, influence the overall level of prices in an economy.
