ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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governments that raise taxes so high that it increases the cost of doing business and, hence, raises prices.
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banks that have market power and refuse to lend money.
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none of these answers.
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governments that print too much money.
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increases in the price of inputs, such as labour and oil.
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Detailed explanation-1: -What creates inflation? Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise.
Detailed explanation-2: -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-3: -Rising prices To get richer, a country has to make and sell more things – whether goods or services. This makes it safe to print more money, so that people can buy those extra things. If a country prints more money without making more things, then prices just go up.
Detailed explanation-4: -An increase in the supply of money typically lowers interest rates, which in turn, generates more investment and puts more money in the hands of consumers, thereby stimulating spending. Businesses respond by ordering more raw materials and increasing production.