When there is too much money flowing and too few goods, it is likely to lead to:

Question

Quizplus · Accepted Answer

When there is a situation of too much money chasing too few goods, it creates an imbalance in demand and supply, leading to inflation. Prices of goods and services rise as people try to buy more with the available money. Therefore, the best choice in this scenario is option C - inflation. Option A, tax cuts, or option D, an interest rate cut, may further fuel demand and worsen inflation. Option B, a rise in taxes, may reduce demand, but it is unlikely to be a preferred policy response during an inflationary phase. Option E, stagnation, is not a likely outcome of excess money supply.

When There Is Too Much Money Flowing and Too Few