All else being equal,a decrease 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

A decrease in the rate of inflation increases planned spending because lower inflation typically leads to lower interest rates, which encourages borrowing and spending. This increase in spending can lead to an increase in short-run equilibrium output.

All Else Being Equal,a Decrease in the Rate of Inflation