If a government supplies more money than the quantity people want to hold

Question

Quizplus · Accepted Answer

If the government supplies more money than the quantity people want to hold, it means that there is an excess supply of money in the economy. In order to get rid of this excess money, people will increase their spending. This increase in spending will drive up the demand for goods and services and ultimately lead to an increase in prices. This is known as demand-pull inflation. Therefore, the correct answer is B - Spending will increase and the price level will rise.

If a Government Supplies More Money Than the Quantity People