Question

An increase in the money supply that causes money to lose its purchasing power and prices to rise is known as______________

Answer 1

Inflation
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country

Answer 2

Answer: An increase in the money supply that causes money to lose its purchasing power and prices to rise is known as Inflation.

Inflation means an increase in the money supply that causes money to lose its purchasing power and prices to rise.

As in case of inflation situation, prices get rise because of increase in the money supply to reduce the purchasing power of the individual or firms.

Measures to rectify the inflation :

1) Fiscal expenditure

2) Revenue expenditure

3) Reduction in deficit financing

Hence, Inflation is the correct answer.