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.
Question
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.
Solution
Inflation occurs when:
b. The quantity of money in circulation rises faster than the stock of goods and services.
Inflation is essentially a rise in the general price level of goods and services in an economy over a period of time. When the quantity of money in circulation increases faster than the production of goods and services, it means there is more money chasing the same amount of goods and services. This leads to an increase in prices, hence inflation.
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Inflation affects an economy by:A.limiting international trade opportunities.B.making prices rise over time.C.reducing the size of the labor market.D.increasing the value of currency.
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