Question

What are the signs of high inflation? Check all that apply. Production begins to fall. Production begins to rise. Interest rates decrease. Interest rates increase. Purchasing power falls. Fewer fixed rate bank loans.

Answer 1

Answer:

a. Production begins to fall.  

d. Interest rates increase.

e. Purchasing power falls.

f. Fewer fixed rate bank loans.

Answer 2

The correct answer is:

Option A) Production begins to fall

Option D) Interest rates increase

Option E) Purchasing power falls.

Inflation is describes the rise in the prices of goods and services in an economy. While rising prices might seem like a bad thing, slight inflation is actually encourage by economic experts. An inflation of 1-2% is deemed resonable and sustainable.

However, if the inflation rate prices from more than 4% in a year, it means that people will have less purchasing power and would be able to buy less. This would impact production as well.

The opposite of inflation is deflation and is also considered harmful for the economcy.