Final answer:
An increase in paper money in circulation causes Inflation (C), a rise in prices due to a decrease in the value of money. This is often due to more money chasing fewer goods and services.
Step-by-step explanation:
An increase of paper money into circulation typically leads to inflation, which is characterized by a general rise in prices and a decrease in the purchasing power of money. When money is abundant, more dollars compete to purchase the same amount of goods and services which can lead to higher prices. In contrast, deflation happens when the value of currency increases and prices decrease, which can discourage spending and borrowing, potentially leading to economic stagnation. During wartime, governments tend to spend significantly, resulting in less production for consumer goods; when war ends and controls are removed, there's a surge in consumer buying power, which can drive prices up and cause inflation.
Increase of paper money into circulation causes inflation or a rise in prices due to the loss of value of money.
Inflation occurs when there is an increase in the supply of money in circulation, resulting in a decrease in the value of money. This increase in the money supply leads to more money available to spend on goods and services, causing prices to rise. When there is too much money chasing after too few goods, people are willing to pay higher prices, resulting in inflation.