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Question
There is an increase in the salaries of employees due to the festival, and due to an increase in the supply of money, the employees decided to buy gifts for family and friends.
Identify the impact of this on the economy.
There is an increase in the salaries of employees due to the festival, and due to an increase in the supply of money, the employees decided to buy gifts for family and friends.
Identify the impact of this on the economy.
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Solution
The correct option is B Increased demand
When the circulation of money in the market increases, it causes a general increase in the supply of money. When there is an increase in money, income of people, and purchasing power, then the effective demand of commodities and services increases but the total supply does not increase according to it. So, there is a rise in prices that leads to an increased demand.
When the circulation of money in the market increases, it causes a general increase in the supply of money. When there is an increase in money, income of people, and purchasing power, then the effective demand of commodities and services increases but the total supply does not increase according to it. So, there is a rise in prices that leads to an increased demand.
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