Answer to Question #93729 in Macroeconomics for Debby

Question

How does growth rate of money lead to inflationary recession?

Answer 1

Inflation can happen if the money supply grows faster than the economic output under otherwise normal economic circumstances. During a recession a cluster of business errors are realized simultaneously. Firms are forced to reallocate resources, scale back production, limit losses and, sometimes, lay off employees due to the sudden growth rate of money.