When the Economy Is Experiencing Cost-Push Inflation, an Inflationary Spiral

question 172

True/False

When the economy is experiencing cost-push inflation, an inflationary spiral is likely to result when
the government adopts a hands-off policy.

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Definitions:

Opportunity Cost

The cost attributed to the refusal of the immediately lesser appealing option during decision-making.

Target Rate

A target interest rate set by the central bank in a country that guides monetary policy decisions, aiming to control inflation, encourage borrowing, or stabilize the economy.

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Money Supply

A comprehensive sum of money in an economy at any given point, covering cash, coins, and the funds maintained in demand and savings deposits.