Question

Inflation in the U.S. economy tends to be: A. a finite, one-time event resulting from a shock.
B. ongoing, as increases in aggregate demand outpace increases in aggregate supply.
C. a finite, one-time event as the Fed actively works to eliminate all inflation.
D. ongoing, as aggregate supply is continually shifting to the left.

Answer 1

Option B. ongoing, as increases in aggregate demand outpace increases in aggregate supply. So option b is the correct option.

What is inflation, and why is it so significant?

The pace of price growth over a specific time period is known as inflation. Inflation is often evaluated in broad terms, such as the general rise in prices or the rise in the cost of living within a country. However, it can also be estimated more precisely for some products, like food, or for services, like a haircut, for instance. Whichever the context, inflation evaluates how much more costly the relevant set of products and/or services have gotten over a specific time frame, most frequently a year.

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