In Defending a Mild Inflation Rate in the Economy, the Proponents

question 104

Multiple Choice

In defending a mild inflation rate in the economy, the proponents argue that a mild inflation is a by-product of strong spending, and as a result:

• A)high spending generates high profit, strong demand for labour and, a great incentive for firms to expand their production capacity.
• B)high spending generates high profit, less need for labour and, a great incentive for firms to cut back production.
• C)high spending increases the general price level, increase in the cost of labour and this would result in cost push inflation.
• D)even a low inflation rate reduces the real output, employment and the profits of the firms.