Which of the Following Is Likely to Occur When Inflation

question 14

Multiple Choice

Which of the following is likely to occur when inflation moves above the target rate of inflation in an economy?

• A) Firms will stop hiring more workers.
• B) The central bank will raise interest rates.
• C) The level of real wages in the economy will increase.
• D) The short-run output level will fall.

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Definitions:

Machine Hours

A measure of the amount of time a machine is utilized during the production of goods, often used to allocate manufacturing overhead.

Productive Capacity

The maximum output a system can produce over a given period under normal conditions, reflecting its efficiency and effectiveness.

Variable Costs

Costs that change in proportion to the level of activity or volume of production within a business.

Additional Processing Costs

Costs incurred when further processing is done on a product after an initial manufacturing phase, often enhancing its value.