Final answer:
Economic growth is steady and prices increase predictably over time when the money supply grows too quickly. On the other hand, a stagnant or slow-growing money supply can constrain economic growth.
Step-by-step explanation:
Economic growth is steady and prices increase predictably over time when the money supply grows too quickly.
When the money supply grows too quickly, it leads to an excess of money in the economy. This excess money boosts demand and increases consumer spending.
As a result, businesses experience increased sales and profits, causing economic growth. However, this rapid growth in the money supply can also lead to inflation as the increased demand pushes up prices.
On the other hand, if the money supply is stagnant or grows slow and steady, it can constrain economic growth. A stagnant money supply may result in lower consumer spending and business investment, leading to slower economic growth.