Which of the Following Would Lead to the Most Inflation

question 16

Multiple Choice

Which of the following would lead to the most inflation?

• A)Both aggregate demand and aggregate supply increase.
• B)Both aggregate demand and aggregate supply decrease.
• C)Aggregate demand increases and aggregate supply decreases.
• D)Aggregate demand increases and aggregate supply increases.
• E)Aggregate supply decreases.

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Definitions:

Compensating Balance

A minimum bank account balance that a borrower must maintain as a condition for some types of loans and lines of credit.

Effective Annual Interest Rate

The interest rate that is adjusted for compounding over a given period. Essentially, it reflects the total interest that will be paid or earned over a year, taking into account the effect of compounding.

Inventory Turnover Rate

A financial metric measuring how often a company's inventory is sold and replaced over a period.

Sales

The total amount of goods or services sold within a specific time frame, indicating the performance and growth of a business.