Multiple Choice
As a result of poor economic conditions in the early 1990s, which of the following most likely occurred in many countries?
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1. Introduction to Macroeconomics
Introduction to Economics
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Typically, low inflation is a sign of which of the following economic conditions?
A
Rapid increase in aggregate demand
B
Stable economic growth
C
Expansionary monetary policy
D
High unemployment
Verified step by step guidance1
Step 1: Understand the relationship between inflation and economic conditions. Inflation measures the general increase in prices over time, and its rate can indicate different states of the economy.
Step 2: Analyze what low inflation implies. Low inflation suggests that prices are rising slowly, which often reflects a balanced or stable economy without excessive demand pressures.
Step 3: Consider the options given: rapid increase in aggregate demand usually causes higher inflation, expansionary monetary policy tends to increase inflation, and high unemployment is often associated with low inflation but signals economic weakness.
Step 4: Recognize that stable economic growth is characterized by moderate demand and supply conditions, leading to low and stable inflation rates.
Step 5: Conclude that low inflation is typically a sign of stable economic growth, as it indicates neither excessive demand nor economic stagnation.
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