ECONOMICS
MONETARY POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increasing rate of employment
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increasing tax revenues
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increasing risk of inflation
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increasing wages
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Detailed explanation-1: -Next, the major disadvantage of economic growth is the inflation effect. Economic growth will cause aggregate demand to increase. If aggregate demand increases faster than the increases in aggregate supply, then there will be an excess demand but a shortage in supply in the economy.
Detailed explanation-2: -If inflation is too high: Workers may then seek larger wage increases to compensate for the effects of higher inflation on their purchasing power. In turn, higher wage growth raises firms’ costs, which may lead firms to raise prices further and/or reduce the number of workers they employ.
Detailed explanation-3: -Government Finance: During the period of inflation, government revenue will increase as more income is obtained from income tax, sales tax, consumption tax, etc. Similarly, as the government needs to spend more and more money for administrative and other purposes, public spending will increase.
Detailed explanation-4: -Less Purchasing Power. The most obvious impact of inflation is that it hurts your purchasing power. Less Savings. Loss of Goods and Services. 29-Jul-2022