MONEY AND INFLATION — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsMONEY AND INFLATION3 Marks
Question
Explain the statement, "Too much money chasing too few goods causes inflation".
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Answer
“Too much money chasing too few goods causes inflation” is a statement given by Machlup. With these words he points out that increased, demand demands more goods whose supply is less.
When the demand increases and there is shortage of supply, there are more buyers for a good as compared to the sellers. So it is like more money is chasing less amount of goods available in the market. This becomes a cause of inflation.
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