ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A an increase in consumer spending
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B an increase in employment
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C an increase in labour productivity
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D an increase in taxes on imports
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Detailed explanation-1: -When a workforce is more productive it produces more goods and services, and at a lower cost per unit. This means there is a greater supply of these things, which puts downward pressure on prices and is therefore associated with lower inflation.
Detailed explanation-2: -More workers searching for jobs means that firms can offer lower wages, putting downward pressure on household incomes, consumer spending and the prices of their goods and services. As a result, inflation will decrease.
Detailed explanation-3: -Deregulation of energy, housing and other markets would reduce the regulatory burden on businesses, lowering the cost of domestic production and bringing down prices.
Detailed explanation-4: -Since the growth rate of the price level is just another term for the inflation rate, the inflation rate must fall. An increase in the rate of economic growth means more goods for money to “chase, ” which puts downward pressure on the inflation rate.