Inflation affects production decisions because it
A)Decreases input costs.
B)Reduces speculation.
C)Causes businesses to focus more on the future.
D)Causes businesses to be more cautious since the future appears more uncertain.

Question

Quizplus · Accepted Answer

Inflation causes uncertainty about the future value of money, which makes businesses more cautious about their production decisions. This is because they may have to pay higher prices for inputs or may not be able to sell their products at higher prices due to reduced purchasing power of consumers. Therefore, businesses may take a more conservative approach to investments and may delay or reduce production.

Inflation Affects Production Decisions Because It