Excessive growth in money supply leads tohigh inflationGroup of answer choicesno effect to the economyhigh inflationno inflationlow inflationNext
Question
Excessive growth in money supply leads tohigh inflationGroup of answer choicesno effect to the economyhigh inflationno inflationlow inflationNext
Solution
Excessive growth in money supply leads to high inflation.
Here's why:
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Money Supply Increase: When there is an excessive growth in the money supply, it means there is more money circulating in the economy than there are goods and services available.
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Demand Increases: With more money in the hands of consumers, demand for goods and services increases.
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Prices Rise: As demand increases, suppliers may not be able to keep up with the demand. This scarcity can lead to an increase in prices.
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Inflation: As prices rise, the value of money decreases, leading to inflation.
So, the correct answer is "high inflation".
Similar Questions
Inflation
Inflation occurs when: Select one: a. Output increases faster than the money supply. b. The quantity of money in circulation rises faster than the stock of goods and services. c. The money supply decreases and the output increases. d. The stock of goods and services increases and the quantity of money in circulation decreases.
inflation: types and causes IN DETAIL
Inflation can be caused byGroup of answer choicesRising rate of unemployment.Firms moving production to countries with lower labor costs.Rising interest rates.Increased total demand for goods and services.
Suppose there an unexpected increase in inflation. Then:Group of answer choicesBorrowers and lenders are worse off by the same amountThere is a redistribution from lenders to borrowersBorrowers and lenders are better off by the same amountThere is a redistribution from borrowers to lenders
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