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12 February, 13:55

Does higher exonomic growth lead to low inflation?

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  1. 12 February, 16:03
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    False

    Explanation:

    On the contrary, high economic growth may lead to high inflation. Economic growth is indicated by an increase in the value of the gross domestic product GDP. The GDP measures economic growth by calculating the values of all the finished goods and services in a country per period.

    Economic growth may be a result of an increase in aggregate demand. The government may institute monetary and fiscal stimulus measures that increase the demand for goods and services. Increased demand results in inflation because consumers will have too much cash, but few goods and services are available. When growth is due to an increase in productivity, inflation is minimal. Inflation is a general increase in prices. Prices usually go up with an increase in economic activities.
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