Inﬂation tends to
A) increase productivity.
B) decrease input prices.
C) increase the strength of the multiplier.
D) reduce the strength of the multiplier.

Question

Quizplus · Accepted Answer

Inflation tends to reduce the strength of the multiplier because it causes overall prices to rise, which reduces the purchasing power of consumers and can lead to decreased demand for goods and services, thereby decreasing the overall economic impact of any given amount of spending.

Inﬂation Tends to