What happens during inflation?
Responses
There's more money in circulation and the prices rise.
There's more money in circulation and the prices rise.
The value of a dollar does not change.
The value of a dollar does not change.
People have less income.
People have less income.
Prices fall and people start spending again.
1 answer
None of the provided responses accurately describe what happens during inflation. During inflation, the general level of prices for goods and services rises, meaning that the purchasing power of money decreases. In other words, it takes more money to buy the same goods and services. Additionally, inflation is typically accompanied by an increase in the money supply, which leads to more money being in circulation. It is important to note that while inflation can lead to a decrease in the purchasing power of money, it does not necessarily mean that people have less income or that prices fall.
1 answer