Question

Fearing a recession, the government decides to give citizens a tax rebate check to buy Christmas gifts. What is a possible outcome of this action
A) higher rates of inflation
B) lower Rates of Inflation
C) higher Interest Rates
D) lower interest rates

Answer 1

Based on the given scenario above, there is likely to have a higher rates of inflation. When there is a high rate of inflation, it is likely that the business or market to have their price to raise because of the rise in interest rates in means of maintain the profit margin that is provided. The correct answer is letter a.

Answer 2

The correct answer is A) higher rates of inflation

The amount of money available to the people would increase and with it the money would lose value. The prices of the gifts would then have to increase since the money has lost its value and then they'd again have problems with their money. This process of money losing value due to its availability is called inflation.