If Persistent Inflation Was Due to Declines in Long-Run Aggregate

question 231

Multiple Choice

If persistent inflation was due to declines in long-run aggregate supply, what pattern would be observed?

• A) Increases in the price level would occur simultaneously with decreases in real GDP.
• B) Increases in the price level would occur simultaneously with increases in real GDP.
• C) Only prices of goods would increase; prices of services would remain constant.
• D) Only prices of services would increase; prices of goods would remain constant.

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Definitions:

Receivables

Receivables are amounts owed to a business by its customers for goods or services delivered on credit, considered a current asset on the balance sheet.

Day-to-Day Operations

The routine activities that are necessary for a business or organization to function efficiently on a daily basis.

Warehouse Financing

A form of inventory financing where loans are made to manufacturers and processors on goods stored in a warehouse as collateral.