Question

What happens during inflation?

People have less income.

There's more money in circulation and the prices rise.

Prices fall and people start spending again.

The value of a dollar does not change.

Answer 1

"There's more money in circulation and the prices rise" is the correct answer.

Answer 2

What usually happens when there is inflation in a country as regards this ques is that B: There's more money in circulation and the prices rise.

• Inflation can be regarded as  measurement of how the prices of good as well as services is going higher. It usually happen when the price of goods increases as a result of increase in the  cost of production.

• These cost of production could be

1. raw materials
2. wages
3. Labor cost

• However ever , when there is very high  increase in demands, then inflation can comes in because the consumer has willingness to pay more for a particular product.

Therefore, option B is right.

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