Question

Business productivity in the last quarter grew at its fastest pace in six years, offering another explanation for how the strong U.S. economy has kept inflation at bay." Higher productivity growth eases inflationary pressures by_____________.a. decreasing the aggregate demandb. increasing the aggregate demandc. increasing the aggregate supplyd. increasing wages

Answer 1

Answer:

b. increasing the aggregate demand

Explanation:

The correct answer to the question is b. increasing the aggregate demand. The Increase in aggregate demand will not have effects on the inflation it will remain constant. Higher productivity growth will be set of by increasing the aggregate demand of the country. Increasing aggregate demand positively impacts large number of individuals in a country.

Answer 2

Answer:

The correct answer is letter "B": increasing the aggregate demand.

Explanation:

Aggregate Demand (AD) represents the number of goods and services consumers could purchase in an economy during a period. The AD curve can shift leftwards and rightwards. A shift to the left represents a decline in the economy while a shift to the right is an indicator of economic growth. The latter is typically caused by an increase in consumer spending, an increase in net exports or expansionary fiscal policies.

Expansionary fiscal policies are the measures taken by the Central Bank to avoid economic downturns. In the case of the U.S., the Federal Reserve (Fed) can increase the interest rate so commercial banks limit the amount of money borrowed from the Fed having a moderate resource to keep their businesses. This situation implies people would have less money available to borrow from banks, thus, the money supply will remain at a steady level avoiding the increase in demand and the increase of prices that leads to inflation.