1. What was Solyndra? How much did it cost? Whose money was it? 2. If the money supply is...


1. What was Solyndra? How much did it cost? Whose money was it?

2. If the money supply is increased and GDP does not, what happens?

Gross Domestic Product:

Gross domestic product refers to the total output that is produced in the country. Gross domestic product is used to measure the economic position of the country. To boost up its economy, country focuses on increasing its total output that is, gross domestic product.

Answer and Explanation:

1. Solyndra was a company that manufactured cylindrical solar panels. It manufactured solar panels for commercial rooftops. George Kaiser family foundation was the major investor on Solyndra.

2. If money supply is increased without the growth of GDP, then inflation will prevail in the market. This is because the amount of money is increased and now more money is used to purchase limited number of goods. Monetary demand causes firm to raise prices of goods and services.

This can be better understood by following graph:

Increase in money supply leads to inflation.

Due to increase in money supply, purchasing power of consumers is increased. Consumers are now demanding more. This leads to rightward shift in demand from aggregate demand1 to aggregate demand2.

Due to this shift, price level is increased from P1 to P2. This causes inflation as the total supply remains the same.

Learn more about this topic:

Gross Domestic Product: Definition and Components

from Economics 102: Macroeconomics

Chapter 4 / Lesson 3

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