In a Demand-Pull Inflation, If the Fed Stops Expanding the Quantity

question 54

Multiple Choice

In a demand-pull inflation, if the Fed stops expanding the quantity of money

• A) a cost-push inflation spiral will occur.
• B) government expenditure will cause the demand-pull inflation to continue.
• C) a deflation will occur.
• D) the demand-pull inflation spiral ends.

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Definitions:

Inflation Rate

The speed at which overall prices for goods and services increase, leading to a decrease in purchasing power.

Hourly Rate

The amount of money paid for one hour of work.

Equivalent

An item that holds the same worth, purpose, or significance as another within a given context.

Pay

The total money received by an employee from an employer as compensation for employment, including all bonuses and allowances.