Refer to the article "The Value of Money" in your Money, Money, Money magazine for a complete version of this text.

Which excerpts from "The Value of Money" show a cause-and-effect relationship?

Select Yes or No for each excerpt.

Yes No

"More demand for a product increases how much of the product is produced."

Yes No

"Governments printing and circulating more money is a way for them to increase inflation on purpose."

Yes No

"This cycle of increased spending and increased production is good for an economy."

Yes No

"This means that wages have not kept up with inflation when it comes to housing prices."

Yes No

Cause-and-effect relationships:

1. "More demand for a product increases how much of the product is produced."

Yes

2. "Governments printing and circulating more money is a way for them to increase inflation on purpose."

No

3. "This cycle of increased spending and increased production is good for an economy."

Yes

4. "This means that wages have not kept up with inflation when it comes to housing prices."

Yes

Explanation:

In Economic, higher demand gives rise to higher prices, which consequently causes supply to rise in order to establish an equilibrium.  Suppliers of goods and services will always produce more with higher demand and higher prices.

2.  The printing of money and circulation of same is not to increase inflation on purpose, though inflation increases as a result.  Governments print more money when they cannot finance their borrowings through bonds.

3. Increased spending with increased production is always good for the economy as it increases the real GDP (Gross Domestic Product), which is a financial metric for measuring an economy's productivity.

4. Wages should be made to keep up with inflation in order not to water down the purchasing power of consumers.

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