Which of the Following Is a Difference Between Inflation and Deflation

question 12

Multiple Choice

Which of the following is a difference between inflation and deflation?

• A)The Federal Reserve buys government securities when inflation is a concern, whereas the Federal Reserve sells government securities when deflation is a concern.
• B)Inflation increases the unemployment rate, whereas deflation decreases the unemployment rate.
• C)A high level of inflation is bad for the economy, whereas a high level of deflation signifies a healthy economy.
• D)Inflation is a period of rising average prices across the economy, whereas deflation is a period of falling average prices across the economy.

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Definitions:

Freight In

Costs associated with getting raw materials, goods, and merchandise transported from suppliers to a company, treated as part of inventory cost.

Multiple-Step Income Statement

A detailed financial statement that separates operating revenues and expenses from non-operating ones, presenting a clear picture of a company's financial performance.

Merchandise Inventory

The goods a company holds in stock with the intent to sell them as part of its business operations.

Administrative Expense

Expenses associated with the general management of a business, such as salaries of executives, office supplies, and utilities.