Inflation occurs whenever
A)there is a one-time increase in the money supply.
B)there is a one-time increase in government spending.
C)the growth rate of nominal aggregate demand exceeds the growth rate of aggregate supply over sustained periods of time.
D)the growth rate of nominal aggregate supply exceeds the growth rate of aggregate demand over sustained periods of time.

Question

Quizplus · Accepted Answer

Inflation occurs when the growth rate of nominal aggregate demand, which includes both the quantity of goods and services demanded and their prices, exceeds the growth rate of aggregate supply, which is the total amount of output produced by an economy over a given period of time. This sustained imbalance between demand and supply leads to a general increase in the level of prices for goods and services, which reduces the purchasing power of money and erodes the value of savings. A one-time increase in the money supply or government spending may have short-term effects on prices, but they are not sufficient to sustain inflation over the long run.

Inflation Occurs Whenever