Historically, some governments have relied on the revenue generated from printing currency to finance government spending. Give two examples of government's relying on paper currency to finance wartime expenditures. What do you expect happened to inflation rates during these historical episodes?
What will be an ideal response?
The Continental Congress issued continentals in 1775 to finance the Revolutionary War. The French Revolutionary Government issued assignats in 1793. The inflation rates during both historical episodes increased. The money supply is linked to the economy's inflation rate. As the money supply grows at a faster rate, the inflation rate rises.
You might also like to view...
Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential
Assume that goods X and Y are substitutes and are produced in perfectly competitive markets. All else constant, in the short run, a decrease in the supply of good X would cause:
A) an increase in the demand for good Y. B) a decrease in the demand for good Y. C) an increase in the supply of good Y. D) a decrease in supply of good Y.
The Fed's principal decision-making body, which directs buying and selling U. S. government securities, is known as the:
a. Federal Deposit Insurance Corporation. b. District Board of Governors. c. Federal Open Market Committee. d. Reserve Requirement Regulation Conference.
In a competitive market, a. demand will always reflect all spillover costs
b. demand will always reflect all spillover benefits. c. supply will always reflect all spillover costs. d. none of the above are true.