Which of the following can trigger inflation?
(1 point)
Responses
The government allows people to start printing their own money.
The government allows people to start printing their own money.
The government doesn’t make enough money.
The government doesn’t make enough money.
The government prints too much money.
The government prints too much money.
The government spends as much money as it makes.
The option that can trigger inflation is:
The government prints too much money.
When a government prints money in excessive amounts, it increases the money supply, which can lead to inflation if it surpasses the economic growth and the capacity of the economy to produce goods and services. This is because more money chasing the same amount of goods tends to result in price increases.
The other options are either nonsensical or do not directly lead to inflation:
- The government allowing people to start printing their own money is not a realistic policy, as it would undermine the credibility and stability of the currency.
- The government not making enough money doesn't directly cause inflation. It might lead to deficit spending or borrowing, but these actions have a more complex relationship with inflation.
- The government spending as much money as it makes would be a balanced budget, which in itself does not cause inflation. However, fiscal policy that leads to overheating of the economy can contribute to inflationary pressure, but this is not a direct cause-and-effect relationship.