Question
The act of stimulating the economy by increasing the
money supply or by reducing taxes, seeking to bring the economy back up to the long-term trend, following a dip in the business cycle, is known as?Solution
Reflation is the act of stimulating the economy by increasing the money supply or by reducing taxes, seeking to bring the economy (specifically price level) back up to the long-term trend, following a dip in the business cycle. It is the opposite of disinflation, which seeks to return the economy back down to the long-term trend. Stagflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. Skewflation refers to inflation in some commodities, deflation in others Deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate).
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