Question

if the federal reserve printed too little money, money's relative price would ________ and the money price of goods would _______.

a. rise; fall

b. fall; rise

c. fall; fall

d. rise; rise

Answer 1

Answer – When new money is printed by the government, then the real value of money goes down. Similarly, if the federal reserve printed too little money, money's relative price would increase. Now, it is to be mind in mind that increasing the supply of money more than the economic growth would lead to inflation. So, if less money is printed, then the money price of goods would fall as well.

Therefore, if the federal reserve printed too little money, money's relative price would rise and the money price of goods would fall.