All else being equal,an increase in the rate of inflation ________ planned spending and ________ short-run equilibrium output.
A) increases;increases
B) increases;decreases
C) does not change;does not change
D) decreases;increases
E) decreases;decreases

Question

Quizplus · Accepted Answer

An increase in the rate of inflation generally decreases planned spending because higher prices reduce purchasing power. This, in turn, decreases short-run equilibrium output as demand falls.

All Else Being Equal,an Increase in the Rate of Inflation