Increase in supply of money will positively affect:
Correct answer: D. Rate of inflation
- A. Economic growth of the country
- B. Rate of unemployment
- C. Labour force participation rate
- D. Rate of inflation
Explanation
An increase in the money supply can raise aggregate demand and, when the economy is near capacity, put upward pressure on the general price level. Its effects on growth and unemployment depend on economic conditions, whereas inflation is the direct expected effect in this question.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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