Which of the Following Is the Primary Cause of Inflation

question 2

Multiple Choice

Which of the following is the primary cause of inflation?

• A)an increase in the quantity of money
• B)an increase in government spending
• C)an increase in unemployment
• D)an increase in productivity

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Definitions:

Short Run

A time period in economics during which at least one factor of production is fixed, limiting the ability of the business to adjust to market changes fully.

Monopolistically Competitive Firm

A type of firm in a market structure where many companies sell products that are similar but not identical, and each has some control over its price.

Monopolistic Competition

A market structure characterized by the presence of several firms that sell similar, but slightly differentiated, products and services where each has some control over its prices.

Zero Economic Profits

A situation in perfectly competitive markets where firms earn just enough revenue to cover their total operating costs, leaving no supernormal profit.