Ayushi posted an Question
August 26, 2020 • 05:11 am 30 points
  • UGC NET
  • Economics

48. if the ccosony is operating at potential gdp, an incroase in the money supply will lead to (1) stagflation (2) structural inflation (3) demand-siae inilatio

48. If the ccosony is operating at potential GDP, an incroase in the money supply will lead to (1) Stagflation (2) Structural inflation (3) Demand-siae inilation () Supply-side inflaion

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    Nidhi taparia Best Answer

    I personally believe the answer is (3). This is because AD will rise due to increase in money supply or expansionary monetary policy. AS being constant, this will lead to demand pull inflation. Structural Inflation also occurs due to expansionary monetary and fiscal policies, but it usually occurs in developing countries where maximum potential has not been reached.

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