Free Practice Question
CR · Critical Reasoning
605-655
Inference
Economic analysts have often regarded inflation as detrimental to an economy, while deflation is perceived as a period for the economy to stabilize at healthier price levels. Recently, however, analysts have started to see gradual inflation as beneficial for contemporary economies, as it indicates an expanding money supply and rising prices. These rising prices can enhance business value and eventually benefit consumers through increased wages. Even though prices rise, consumers tend to have more disposable income, which encourages spending and aids in economic stability. Many analysts argue that inflation can support an economy facing recession.
Which of the following can be inferred from the statements made in the passage above?
Which of the following can be inferred from the statements made in the passage above?
Answer Choices
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(A) Contemporary analysts would favor a significant level of inflation over a significant level of deflation.
B
(B) Traditionally, periods of deflation have indicated weak economic growth, while periods of inflation have indicated strong economic growth.
C
(C) Inflation is beneficial for a domestic economy, but an increase in money supply often leads to lower currency values and diminished international purchasing power.
D
(D) While moderate inflation can benefit an economy, excessive inflation can severely harm a robust economy.
E
(E) Prices for consumers are reduced during deflation, but this does not aid an economy in recession, as consumers have reduced disposable income and thus spend less.
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J
JosephMar 7, 2025
Great!
Details
Difficulty
605-655
Type
CR