Question

When the government injects money into the economy , consumers may hav less purchasing power, which may lead to

Answer 1

Answer:

Inflation

Explanation:

Inflation is a monetary phenomenon, that is, directly associated with the amount of money in circulation in the economy. When there is a large amount of money in circulation, traders perceive the increase in the circulation of money and raise the prices of the products, causing inflation. Consequently, the purchasing power of consumers decreases, because with the same salary, after an inflationary phenomenon, a smaller amount of goods and services can be consumed.

For example, if with $ 100 it is possible to buy 10 sandwiches before an inflationary process. If the government injects money into the economy, sandwich vendors will have the perception that there is more money to consume their products and they will increase the price of the sandwich by, for example, 10 percent. So, after inflation, with $ 100 it will not be possible to buy 10 sandwiches, but only 9, which represents a loss of consumer buying power.

Answer 2

More money in the economy means the value of it decreases. This leads to inflation.