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    Question

    The act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy back up to the long-term trend, following a dip in the business cycle, is known as?

    A Stagflation Correct Answer Incorrect Answer
    B Reflation Correct Answer Incorrect Answer
    C Deflation Correct Answer Incorrect Answer
    D Skewflation Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy (specifically price level) back up to the long-term trend, following a dip in the business cycle. It is the opposite of disinflation, which seeks to return the economy back down to the long-term trend. Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. Skewflation refers to inflation in some commodities, deflation in others Deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).

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