Question

According to "The Value of Money," what is one reason that inflation happens? There is a decrease in overall wages. Parts needed to make certain products become cheaper. The government decides to print less money. Supply shock makes goods and services hard to find.

Answer 1

Inflation can result from rising demand and reduces the value of money. Money loses value when its purchasing power falls. Since inflation is a rise in the level of prices, the amount of goods and services a given amount of money can buy falls with inflation.