Explain the relationship between money supply and inflation, Microeconomics

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Problem 1:

a. Describe the term ‘inflation' and explain the relationship between money supply and inflation.

b. Describe the conditions and processes that are associated with the following types of inflation:

(i) Demand-pull; and
(ii) Cost-push.

Problem 2:

a. What are the main reasons why a government might seeks to control a monopoly firm's profit?

b. Draw a diagram to compare long run output decisions for a monopolist and a perfectly competitive firm.

c. Describe why in some ways monopolies can be good for an economy.


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