Question 3
Money and InflationIt is generally believed that inflation in West Africa is caused by all the factors listed below except
- A.excessive bank lending
- B.budget deficit
- C.rising incomes
- D.shortages in supply
- E.decrease in money supply.
Show the answer and explanation
Answer: E (decrease in money supply.)
Explanation
A fall in money supply reduces spending and pulls prices down; the other factors push prices up.