ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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long run growth is not desirable.
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it will help prevent recessions from happening.
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it is important to keep unemployment from getting too high.
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it is important to keep inflation from getting too high.
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Detailed explanation-1: -The why we must control inflation is simple: It hurts the poorest among us the most. The poor do not own assets that increase in value during inflationary periods. Their fixed incomes are stretched to a point that purchasing the basics needs of living becomes impossible.
Detailed explanation-2: -Inflation decreases during recessions and increases during expansions (recoveries).
Detailed explanation-3: -As an economy grows, businesses and consumers spend more money on goods and services. In the growth stage of an economic cycle, demand typically outstrips the supply of goods, and producers can raise their prices. As a result, the rate of inflation increases. Inflation is a sustained rise in overall price levels.
Detailed explanation-4: -In an inflationary environment, unevenly rising prices inevitably reduce the purchasing power of some consumers, and this erosion of real income is the single biggest cost of inflation. Inflation can also distort purchasing power over time for recipients and payers of fixed interest rates.