Question

Increase in supply of money brings inflation

Answer 1

Explanation:

Increasing the money supply faster than the growth in real output will cause inflation. The reason is that there is more money chasing the same number of goods. Therefore, the increase in monetary demand causes firms to put up prices.

Answer 2

Answer:

The increase in the money supply is mirrored by an equal increase in nominal output, or Gross Domestic Product (GDP). The increase in the money supply will lead to an increase in consumer spending. ... Increased money supply causes reduction in interest rates and further spending and therefore an increase in AD.