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Chapter 10: Problem 36

Businesspeople generally like a little but dislike a little _____ dislike a little _____. a) inflation, deflation b) deflation, inflation

Short Answer

Expert verified
The correct answer is option 'a': Businesspeople generally like a little inflation but dislike a little deflation. This is because a little inflation can stimulate spending, which is good for businesses, while deflation can lead to decreased economic activity, which is detrimental for businesses.

Step by step solution

01

Understanding the basic terms

Before proceeding to fill in the blanks in the sentence, make sure to understand the basic economic concepts of inflation and deflation. Inflation is the rate at which general level of prices for goods and services rises, causing purchasing power to fall. This can stimulate spending, which is good for businesses. Deflation, on the other hand, is the decline in prices for goods and services that occurs when the inflation rate falls below 0%. This often leads to less economic activity, which can be bad for businesses.
02

Applying the concepts to the sentence

Apply the understanding of the concepts of inflation and deflation to the sentence. Given that most business people would prefer a state of minor inflation over deflation because of the potential to stimulate spending and consumption, the blank spaces in the sentence would be filled as -, "Business people generally like a little inflation but dislike a little deflation"
03

Choosing the correct answer

Based on the understanding and application of the economic concepts, it is clear that the correct choice would be option 'a'. That is, "Businesspeople generally like a little inflation but dislike a little deflation". So, the correct answer is option 'a'.

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Most popular questions from this chapter

In 2025 the CPI rose 10 percent; in 2026 it rose 6 percent; and in 2027 it rose 2 percent. We could describe 2027 as a year of _____. a) inflation b) disinflation c) deflation

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