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Overspending brings more money into people's pocket and thus raises aggregate demand in the economy, especially in the short run where production units can not easily adjusted to increase their production! This creates excess demand or demand pull type of inflation underwhich too much money is chasing too few goods and services.
In another scenario, government overspending leaves many government workers with little to no accountability. Low accountability eventually leads to a lack of motivation and production. With low production and too much money in people's pockets, we expect excess demand and demand pull inflation too!!
By Balozi Morwa
(Tanzania Investment Bank, 2013)
Wiki User
∙ 11y ago
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How does the government fiscal policy affect the economy?
When inflation increase
How will inflation affect hospitality industry in Nigeria?
how does inflation affect hospitality in nigeria industry
The consumers price index helps the U.S. government measure what?
inflation
How do interest rates and inflation affect real estate in south Africa?
explain how do intrest rates and inflation affect the real estate
What is the meaning of suppressed inflation?
Existing inflation disguised by government price controls or other interferences in the economy such as government price subsidies.
How does the government fiscal policy affect the economy?
When inflation increase
How will weather affect the inflation of giant balloons?
how will the weather affect the inflation of the ballooons
How will inflation affect hospitality industry in Nigeria?
how does inflation affect hospitality in nigeria industry
The consumers price index helps the U.S. government measure what?
inflation
How do interest rates and inflation affect real estate in south Africa?
explain how do intrest rates and inflation affect the real estate
How will the weather affect the inflating of the balloons?
how will the weather affect the inflation of the ballooons
Was the ATM the answer to inflation?
No. The ATM does not in any way affect or answer inflation. It is just a machine through with customers can do banking transactions without visiting their bank. It does not cause or affect inflation. Only the country's central bank can control inflation by changing regulatory policies.
What did the the government do to combat inflation?
The government raised and extended the income tax to help combat Wartime Inflation. The government also encourage individuals to by war bonds.
What is the meaning of suppressed inflation?
Existing inflation disguised by government price controls or other interferences in the economy such as government price subsidies.
How do chemicals affect the inflation of a balloon?
Inflation of a balloon is NOT a chemical reaction, so there are no chemicals involved in 'affecting' it.
What rules should the government have in economics?
inflation
How does increased stock prices affect the nation?
Inflation!
