Suppose that the government of Venezuela decided to give everyone in the country the equivalent of...
Suppose that the government of Venezuela decided to give everyone in the country the equivalent of $20,000. Upon receipt of the money, people raced to the stores to buy furniture, electronics, and new clothes. There was such high demand for goods that producers raised prices. What is this an example of?
a. isolationism
b. inflation
c. spot exchange
d. recession
e. a planned economy
Homework Answers
Option B.
- In the above scenario it is given that the when the government decided to give everyone $20,000, demand for goods and services within the country increased.
- This sudden increase in the demand forced the producers to raise their prices in order to earn more profits.
- Hence this is considered as an example of inflation as inflation is caused due to a sudden surge in the demand for goods and services which causes the price's to rise to a greater extent when the consumer's willingness to pay Increases.
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