In Germany in January 1921, a daily newspaper cost 0.30 marks. Less than two years later, in November 1922, the same newspaper cost 70,000,000 marks. All other prices in the economy rose by similar amounts. Although the United States has never experienced this phenomenon even close to that in Germany in the 1920s, this phenomenon has at times been an economic problem. During the 1970s, for instance, the overall level of prices more than doubled, and President Gerald Ford called this phenomenon “public enemy number one.” By contrast, this, in the 1990s, was about 3 percent per year; at this rate it would take more than 20 years for prices to double. Because high state of this phenomenon imposes various costs on society, keeping it at a low level is a goal of economic policymakers around the world. How does it happen? What causes it? In almost all such cases that are large or persistent, the culprit turns out to be the same—growth in the quantity of money. When a government creates large quantities of the nation’s money, the value of the money falls. In Germany in the early 1920s, when prices were on average tripling every month, the quantity of money was also tripling every month. Although less dramatic, the economic history of the United States points to a similar conclusion: similar case of high state of the phenomenon of the 1970s was associated with rapid growth in the quantity of money, and the low state of the same phenomenon of the 1990s was associated with slow growth in the quantity of money.

Q5. The economic history of Germany of 1920's and the same of the USA of 1970's tell us the same story. The nutshell of the stories gives both the governments an economic lesson. What does the story revolve around?Required to answer. Single choice.

select your answer

- Quality of goods and services

-Quantity of goods and services

- Quantity of money

- Quality of money