Multiple choice

The cause of inflation is:

  1. Increase in money supply

  2. Fall in production

  3. Increase in money supply and fall in production

  4. Decrease in money supply and fall in production
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Inflation is generally caused by an imbalance between supply and demand. An increase in money supply (excess demand) combined with a fall in production (reduced supply) creates significant upward pressure on prices.

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