Assume the Inflation Rate Falls from 4 Per Cent to 2

question 73

Multiple Choice

Assume the inflation rate falls from 4 per cent to 2 per cent. This means that

• A)the price level is increasing more slowly.
• B)the price level has fallen.
• C)the economy is experiencing deflation.
• D)real GDP is decreasing.

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Definitions:

Variable Costs

Expenses that change in proportion to the amount of goods produced or the volume of sales, including labor and materials.

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, highlighting the scalability of a company’s business model.

Variable Costs

Expenses that vary in relation to the amount of output or business operations.

Fixed Costs

Business expenses that remain constant, regardless of the level of production or sales activity.