When National Output Increases and the Inflation Level Falls, the Economy

question 70

Multiple Choice

When national output increases and the inflation level falls, the economy is said to be in a(n) _____.

• A) inflationary boom
• B) deflationary boom
• C) inflationary recession
• D) deflationary recession

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Definitions:

Forward Exchange Rate

An agreed exchange rate for a currency to be exchanged at a future date, used in hedging and trading strategies.

Inflation Rates

The rate at which the cost of general goods and services inflates, consequently eroding the power to buy.

Relative Purchasing Power Parity

An economic theory that states the rates of change in price levels between two countries should equal the rate of change in the exchange rate between their currencies.

Triangle Arbitrage

A practice of profiting from the price differential between three different currencies in the foreign exchange market.