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Q: Why does a high rate of GDP growth cause higher inflation?
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What is the cause the unemployment part of stagflation?

Stagflation is an economics term used to describe the situation when you have a stagnant economy (no job growth) but high unemployment and high inflation. This is usually caused by an increase in the total labor force. There is just too many people in the workforce and not enough jobs available.


What does the term Stagflation referred to?

a period of high inflation and slow economic growth


When GDP growth is high are prices high?

There does not have to be any correlation between the two. High inflation, on the other hand, will decrease purchasing power if salaries don't go up as much as the inflation.


What decades was there both high inflation and rapid money supply growth in the US?

1970s


What sre the Disadvantage of high GDP Economic growth?

There are many disadvantages with high GDP growth. Businesses can have high Debts from banks that results into market break down. You can also have high inflation, which is caused by the every changes in growth.


What might happen to aggregate supply curve if there was a significant increase in the cost of foreign oil?

The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible. When an economy experiences stagnant growth and high inflation at the same time it is referred to as stagflation.


Why do Governments and economists worry about inflation?

Even though its been a quite a while since you posted this question but I would say that the government might be worried about a high rate of inflation because it can lead to increased market interest rates, making government borrowing more expensive. High relative inflation can also lead to a worsening of international competitiveness causing a fall in exports which can then threaten jobs and forecast GDP growth. Additionally, high inflation can cause GDP growth to slowdown – leading to lower tax revenues & increased borrowing. Hope this helped:)


What happened to the economy during stagflation?

Higher rates of inflation, decrease in business productivity, high unemployment


Is inflation harmful?

Too much inflation will ruin the economy but small levels of inflation will spur growth. Inflation is very harmful to any economy because it can ruin the economy's development and growth and this is not suppose to be. Inflation is also very harmful to any economy because the people living in that economy might not survive the situation and this is when you see that an economy is affected and if nothing is done to it, it can cause an economy to collapse.


Is inflation always bad for economy?

Inflation is certainly not always bad for economy, in fact a moderate level of inflation matching to it's growth rate is good for the country. Moderate inflation suggest demand in the system while no inflation or deflation suggest demand collapse which is much more dangerous than Inflation. For Instance US inflation is 1.5 to 2% while it's growth is 2-3%. This equation is ok. A Country having an inflation equal to it's growth rate is not bad though it is always preffered to have lower inflation and high growth rate. But it is difficult to achieve on a continuous basis. Reserve banks all over the world prefer and try hard to have moderate inflation and would worry if there is a situation of deflation. But too high inflation will make the currency of the country very weak against the major global currencies and will bring the economy to it's knees, like what happened in case of Zimbabwe.


Which of these statements best describes the econmoy during the late 1970s?

Inflation and Unemployment was high! :)


How would a relatively high home inflation rate affect home country's current account other things being equal?

Inflation, which is the rise in prices of goods and services within a country, could cause a deficit, or at least an imbalance (depending on the length of the higher inflation time period) in the current account.