A Simultaneous Increase in Inflation and Decrease in Economic Growth

question 51

Multiple Choice

A simultaneous increase in inflation and decrease in economic growth in a country can be associated with:

• A)a decrease in aggregate demand with no change in aggregate supply.
• B)an increase in aggregate demand and aggregate supply.
• C)an increase in aggregate supply with no change in aggregate demand.
• D)a decrease in aggregate supply and aggregate demand.
• E)a decrease in aggregate supply with no change in aggregate demand.

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Definitions:

Chain-Weighted Price Index

An economic measure that accounts for changes in quantities and prices to more accurately reflect the real growth over time.

Consumer Price Index

Measure of the aggregate price level.

Laspeyres Index

A price index used to measure the price change between a base period and the current period, using the base period quantities as weights.

Paasche Index

An economic measure that calculates the change in the price level of goods and services purchased by the consumer in the current period compared to a selected base period, weighting the current period prices.