Question

increases in output and increases in the inflation rate have been linked to part 2 a. discretionary government spending. b. higher rates of interest. c. increases in the money supply. d. discretionary tax policy.

Answer 1

An increases in output and increases in the inflation rate have been linked to an increases in the money supply. The Option C is correct.

What is the effect of increased money supply?

Basically, a money supply refers to all the currency and other liquid instruments in a country's economy on the date measured. The term "money supply" roughly includes both the cash and deposits that can be used almost as easily as cash.

The governments issue a paper currency and coin through some combination of their central banks and treasuries. The bank regulators does influence the money supply available to the public through the requirements placed on banks to hold reserves, how to extend credit, and other money matters.

When there is an increases in money supply, this spurs investment and through putting more money in the hands of consumers, making them feel wealthier and thus stimulating economic spending.

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