Which of the Following Statements About Inflation Is True

question 135

Multiple Choice

Which of the following statements about inflation is true?

• A) Inflation increases the purchasing power of consumer dollars.
• B) Inflation occurs when people have more money to spend as the quantity of goods available increases.
• C) Inflation occurs when the amount of money taken out of the economy exceeds the amount of money put into the economy.
• D) Inflation and deflation are really almost synonymous in practice.
• E) None of these.

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Definitions:

Short-run

A time frame in which at least one factor of production is fixed, limiting adjustments to production levels.

Economic Profits

The difference between a firm's total revenues and its total economic costs, where economic costs include both explicit and implicit costs.

Perfectly Competitive

In a perfectly competitive market, there are many buyers and sellers, the products are homogenous, and no single entity can influence the market price.

Demand Rises

Occurs when there is an increase in the quantity of a good or service that consumers are willing and able to purchase at a given price.