Prices rise when a government prints too much money

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Reference no: EM131162165

One of the economic principles says: "Prices rise when a government prints too much money".

1- Explain and justify in details how this principle works.

2- Suppose in a bank the amount of reserves $80 and the reserve ratio R= 20%. Find the increase in the money supply.

3- In your opinion, what are the procedures and tools that the central bank has to use in order to decrease the negative effects of increasing money supply?

Reference no: EM131162165

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