If there is an increase in the money supply that causes money to lose its purchasing power and leads to inflation, what happens to prices?

A. They Fluctuate.

B. They Rise.

C. They Fall

D. They remain unchanged.

Question

History

Cedric Mills

7 April, 23:03

If there is an increase in the money supply that causes money to lose its purchasing power and leads to inflation, what happens to prices?

A. They Fluctuate.

B. They Rise.

C. They Fall

D. They remain unchanged.

+3

Answers (2)

Know the Answer?

Adrianna Valenzuela · Answer 1

because there is so much money circulating prices will obviously increase

B. They Rise

Jewel Bond · Answer 2

Option B.

Explanation:

They Rise, is the right answer.

The term money supply is used to describe the absolute value of money accessible economy at a period of time. The link between money and prices has traditionally been correlated with the quantity theory of money. There is substantial observational data of a direct relationship between the increase of the money supply and long-term value inflation, at least for accelerated improvements in the amount of money in the marketplace.

If there is an increase in the money supply that causes money to lose its purchasing power and leads to inflation, what happens to prices?A. They Fluctuate.B. They Rise.C. They FallD. They remain unchanged.

If there is an increase in the money supply that causes money to lose its purchasing power and leads to inflation, what happens to prices?

A. They Fluctuate.

B. They Rise.

C. They Fall

D. They remain unchanged.