Question

Which is the cause and effect of inflation according to monetary definition?

Answer 1

1:According to the monetary definition, an increase in the supply of money is the cause, and a rise in price level is the effect of inflation. If there is an increased supply of money in an economy, then prices will rise.
2:This happens when interest rate is decreased resulting in cheap availability of credit in an economy causing an increase in purchasing power, resulting in increase in demand of goods & services.
3:When there is increase in demand, prices tend to rise. Hyperinflation is usually caused by an extreme increase in the money supply.