Question

True or false, Inflation occurs in an economy when there's a reduction in the total amount of money.

Answer 1

False.

Inflation occurs in an economy when there is an increase in the overall price level of goods and services over time. It is usually caused by factors such as an increase in the money supply, higher demand for goods and services, or a decrease in the supply of goods and services. Therefore, a reduction in the total amount of money in an economy would generally lead to deflation, which is the opposite of inflation.