The National Bank of Fragana implements monetary policies that help to control currency supply and maintain price stability. When there is a demand, the bank prints more money. This increases currency supply and stimulates borrowing and growth within Fragana. Predict the most likely outcome when this increase causes a decline in the purchasing value of money in Fragana.

Question

Quizplus · Accepted Answer

When the National Bank of Fragana prints more money, it increases the currency supply, which can lead to a decline in the purchasing value of money, commonly resulting in inflation. This inflation can cause Fragana's currency to depreciate in value compared to other currencies.

The National Bank of Fragana Implements Monetary Policies That Help