When a country's inflation rate varies substantially from year-to-year and is therefore difficult to predict, this will
A) reduce the volume of trade and the gains derived from it.
B) reduce the risk accompanying investment.
C) encourage entrepreneurs to innovate and develop better products.
D) increase the level of foreign investment in the country.

Question

Quizplus · Accepted Answer

High levels of inflation and unpredictable variations make it more difficult for businesses to plan and make long-term investments. This creates uncertainty and risk, which can discourage trade and investment.

When a Country's Inflation Rate Varies Substantially from Year-To-Year and Is