What will happen if money supply is increased?

lease answer...
1. What will happen if money supply is increased?
a. Inflation
b. Deflation
c. Increased economic activity
d. Decreased economic activity

Comments

  • What's your doubt?
  • If growth remains same, increased money supply will cause inflation.
    If growth rate is commensurate to money supply, answer will be increased economic activity.
  • M * v = p * Y

    M = money supply.
    V = velocity of money
    P = prevailing price levels or Inflation
    Y = real GDP
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  • Pnkjsrma said:

    lease answer...
    1. What will happen if money supply is increased?
    a. Inflation
    b. Deflation
    c. Increased economic activity
    d. Decreased economic activity

    a) inflation only
    as economic activity depends on many other factors also..like whether that money supply is frm blc mkrt/printing notes/genuine/ economic activity may increase in long term bt immediate implication will be inflation n because of that then slowly growth may increase n economic situatin
    it will matter in the end...definitely..
  • After WW1 to pay for the war reparations of the Versailles Treaty, Germany printed money, which led to inadvertent increase in money supply within the national economy, which led to hyper-inflation and eventually led to collapse of the economy (decreased economic activity). Timeframe and context are important thus. Just food for thought.
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  • When you pump in money into an economy, if the production remains the same, there would be inflation in short term. However, in the longer run, there is a possibility of some growth also- more money will be invested in research, technology, manufacturing health etc.

    However, there may be some exceptions like Zimbabwe!
    An Ounce of Action Is Worth a Ton of Theory
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