President Dude, the leader of the island nation of Jaylo, refuses to raise taxes, but wants to expand many government services and increase the size of the Jaylo armed forces. He plans to pay for all of the desired expenditures by printing more money. If President Dude carries out his plan by rapidly increasing the supply of money, Jaylo will likely experience:

Question

Quizplus · Accepted Answer

If President Dude carries out his plan by rapidly increasing the supply of money, it will lead to an increase in the money supply relative to the supply of goods and services, causing the value of money to decrease. This results in an increase in the general price level, which is inflation. Therefore, the likely outcome of President Dude's plan is an increase in the rate of inflation.

President Dude, the Leader of the Island Nation of Jaylo