An article in the Economist notes that the government of Venezuela running a large budget deficit "caused the money supply almost to quadruple in two years and led to the world's highest inflation rate, of over 60% a year."
a. Why would running a large budget deficit cause the money supply in Venezuela to increase so rapidly?
b. If the money supply increased by 150 percent per year (or 300 percent over two years) while the inflation rate was 60 percent, what must have happened to velocity in Venezuela during this period?