As per Quantity Theory of Money put forth by Milton Friedman, growth in the quantity of money is the primary determinant of the inflation rate.
Theory suggests that as money supply increases, inflation should increase too and as money supply decreases, so should inflation rate.
There is a possitive correlation between inflation rate and money supply.
It is evidant from the trendline that the theory is actually correct as applied on long term data of Pakistan.

DecadeAverage_Inflation_RateAverage_Money_Supply_Growth
1960s3.50750911.334355
1970s12.41867716.983457
1980s6.97693913.28831
1990s9.24723116.183779
2000s8.91954418.484111
2010s6.946317777777777777777777777812.454747777777777777777777778
2020s  



DMCA.com Protection Status