A Reduction in Inflation Would Lead to

question 9

Multiple Choice

A reduction in inflation would lead to

• A)more frequent price changes and increased variability of relative prices.
• B)more frequent price changes and decreased variability of relative prices.
• C)less frequent price changes and increased variability of relative prices.
• D)less frequent price changes and decreased variability of relative prices.

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Definitions:

Substitution Effect

The change in the quantity of a good consumed as the consumer substitutes other goods that are now relatively cheaper in place of the good that has become relatively more expensive.

Leisure

The time available for purposes other than earning money to buy marketed goods.

Nonmarket Use

Utilization or value derived from a good or service outside of commercial or financial transactions, typically involving public or shared resources.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, across different jobs and industries.