An Increase in the Rate of Inflation

question 28

Multiple Choice

An increase in the rate of inflation:

• A) can only result from increases in aggregate demand.
• B) can only result from upward shifts in the short-run aggregate supply curve.
• C) will result only if the long-run aggregate supply curve is vertical.
• D) can result from shifts in either the dynamic aggregate demand curve or the short-run aggregate supply curve.

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Definitions:

Well-diversified Portfolio

An investment portfolio constructed to spread risk across various asset classes and investment vehicles to minimize potential losses.

Risk Aversion

The reluctance of a person or entity to take risks.

Expected Returns

The projected return on an investment, taking into account both the probability and the impact of known risks.

Risky Securities

Financial instruments that carry a high degree of investment risk due to their significant exposure to market volatility.