Which of the Following Will Lead to Sustained Inflation

question 30

Multiple Choice

Which of the following will lead to sustained inflation?

• A)the sudden doubling of a key raw materials price
• B)a new payroll tax that raises firms' unit labour costs
• C)persistent expectations of continued inflation
• D)an early frost that damages the agricultural harvest
• E)the imposition of a new sales tax

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and profits while maintaining a consistent return on equity and without raising additional equity financing.

External Financing

Funds raised from outside the business, e.g., through borrowing or issuing equity.

Debt-equity Ratio

The ratio reflecting on the strategic use of shareholders' equity and debt for the purpose of financing assets.

Growth Rate

The rate at which a company's earnings or revenue increases over a specified period, typically expressed as a percentage.