ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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dramatic decreases in inflation rates.
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excessive rates of inflation, which may lead to hyperinflation.
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high rates of inflation but very low levels of unemployment.
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problems with deflation.
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Detailed explanation-1: -If the government prints too much money, people who sell things for money raise the prices for their goods, services and labor. This lowers the purchasing power and value of the money being printed. In fact, if the government prints too much money, the money becomes worthless.
Detailed explanation-2: -Does Printing Money Cause Inflation? Yes, “printing” money by increasing the money supply causes inflationary pressure. As more money is circulating within the economy, economic growth is more likely to occur at the risk of price destabilization.
Detailed explanation-3: -Effects of Hyperinflation When prices rise excessively, money decreases in value because inflation causes it to have less purchasing power. Less purchasing power means consumers spend more to buy less. As a result, they have less money to pay bills and fewer dollars to use on essential items.
Detailed explanation-4: -The two primary causes of hyperinflation are (1) an increase in money supply not supported by economic growth, which increases inflation, and (2) a demand-pull inflation, in which demand outstrips supply. These two causes are clearly linked since both overload the demand side of the supply/demand equation.