An increase of 1% per annum in the rate of growth of the money supply will increase inflastion in the long run by____
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Based on your question I’ll have to assume your talking about the rate of growth i.e say if the rate of growth is 5%, a 1% increase makes the new growth rate 6% meaning
base year money supply= 100 units
at 5% growth rate=105 units(100x1.05)
an increase of 1% in the growth rate=111.3 units(105x1.06) .
On the other hand, increasing the money supply by 1% means 100 units become 101 units.
It is very difficult to determine rate of growth for money supply instead Central banks stimulate increase or decrease of money supply by dictating the policy interest rate.
Inflation is the increase in the price level of goods and services measured seasonally. An increase in money supply can cause inflation if the supply of goods decreases or remains constant. In this case, consumers have more money to spend but less goods are available. The market will set equilibrium through increase in prices. Other factors that affect pricing include recessions, taxation, consumer preference, willingness of banks to lend money, environment, global oil prices.
An economic recession is the decrease of GDP for a given period.
Taxation will cause increase in prices if taxes on goods and services are increased.
Consumer preferences includes is dependent on factors likesocial class, brands, peer influence and so forth. A consumer might also decide to keep money under their matress for future use creating a shortage of money in the market which will eventually lead to inflation.
If banks are unwilling to lend money even with an increase in supply it will affect the pricing of goods.
Environmental factors like drought, storms, El ninos have been observed to cause sudden inflation.
So to answer your question, it is very difficult to for the inflation rate to increase based on the increase of money supply alone.
base year money supply= 100 units
at 5% growth rate=105 units(100x1.05)
an increase of 1% in the growth rate=111.3 units(105x1.06) .
On the other hand, increasing the money supply by 1% means 100 units become 101 units.
It is very difficult to determine rate of growth for money supply instead Central banks stimulate increase or decrease of money supply by dictating the policy interest rate.
Inflation is the increase in the price level of goods and services measured seasonally. An increase in money supply can cause inflation if the supply of goods decreases or remains constant. In this case, consumers have more money to spend but less goods are available. The market will set equilibrium through increase in prices. Other factors that affect pricing include recessions, taxation, consumer preference, willingness of banks to lend money, environment, global oil prices.
An economic recession is the decrease of GDP for a given period.
Taxation will cause increase in prices if taxes on goods and services are increased.
Consumer preferences includes is dependent on factors likesocial class, brands, peer influence and so forth. A consumer might also decide to keep money under their matress for future use creating a shortage of money in the market which will eventually lead to inflation.
If banks are unwilling to lend money even with an increase in supply it will affect the pricing of goods.
Environmental factors like drought, storms, El ninos have been observed to cause sudden inflation.
So to answer your question, it is very difficult to for the inflation rate to increase based on the increase of money supply alone.
Amanisha76:
apne jo answr diya h 1%..wo hi ryt h bt kese aaya ye
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