Increases in the money supply growth rate increases inflation

Economists agree that increases in the money supply growth rate increases inflation, and that a high inflation rate is undesirable.
(a) Explain what type of macroeconomic decisions lead to deflation and how Central Banks and/or Governments are able to combat it.
(b) Explain why deflation can be damaging to the economy and find examples in the recent economic history (1900 – present) to illustrate this point.

Further Notes:
This is a research project.
– Use exhibits and appendices to provide succinct, relevant and clear information. Focus on the critical issues and the holistic framework rather than minor detail.

Assessment Criteria:
The value of your work will be ultimately assessed on its practical usefulness and relevance to the business, and the demonstration of critical understanding of relevant theories. The specific assessment criteria are:
– Demonstrated competence, understanding and practical application – Demonstrated identification, evaluation and interpretation of
appropriate techniques
– Ability to identify a range of complex scenarios and data for decision
– Ability to determine and evaluate appropriate planning methods
and techniques
– Evidence of relevant background research, supported by examples,
citation and a bibliography in Harvard format




Sample Solution