The Reason That Stagflation Tends to Follow an Inflationary Gap

question 76

Multiple Choice

The reason that stagflation tends to follow an inflationary gap is that

• A)output tends to fall even as prices continue to rise as part of the self-correcting mechanism.
• B)government officials tend to overact in controlling inflation.
• C)businesses try to increase profits by raising prices and increasing output.
• D)workers accept pay cuts to maintain employment.

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