The Sequence of Events by Which Inflation Can Reduce Output

question 77

Multiple Choice

The sequence of events by which inflation can reduce output is:

• A)as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to increase.
• B)as prices rise, the quantity of goods and services demanded increases, the firms therefore, produce more output which causes the unemployment to decrease.
• C)as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to increase.
• D)as prices rise, the quantity of goods and services demanded falls, the firms therefore, produce less output which causes the unemployment to decrease.

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Definitions:

Wage Rate

Compensation received by an employee for performed work, typically quantified on an hourly, daily, or yearly basis.

MRP

The extra income produced by using an additional unit of a resource or production factor.

Capital

Assets such as funds, equipment, and real estate used in business operations that contribute to the production of goods and services.

Labor

The human effort, either physical or mental, that is used in the production of goods and services.