Question

If a high inflation rate leads people to ______ their money holdings, this may lead to a further increase in the money supply and ______ inflation.

Answer 1

Answer:

Reduce, increase

Explanation:

If a high inflation rate leads people to reduce their money holdings, this may lead to a further increase in the money supply and increase inflation.

Inflation will cause individuals to spend more more money thus the tendency to reduce money holding to meet cash spending. This in turn will lead to increased cash in circulation and thus increase in inflation.