The behaviour by the Reserve Bank is a key factor underlying the link between ______ and _____, and is summarised by the aggregate demand curve.
A)inflation; input
B)inflation; output
C)inflation; income
D)inflation; taxes

Question

Quizplus · Accepted Answer

The behaviour by the Reserve Bank (such as raising or lowering interest rates) affects inflation (the rate of price increases) which ultimately affects output (the total amount of goods and services produced in an economy). This relationship is summarised by the aggregate demand curve, which shows the level of output that will be demanded at different price levels. Therefore, the correct pair is inflation and output.

The Behaviour by the Reserve Bank Is a Key Factor