Which of the Following Can Cause Cost-Push Inflation If the Economy

question 60

Multiple Choice

Which of the following can cause cost-push inflation if the economy is currently in equilibrium at full-employment GDP?

• A)A flood which destroyed much of the country's crops.
• B)An increase in the size of the labour force.
• C)A decrease in personal income tax rates, which increases after-tax income.
• D)An increase in the capital stock in the country.

---

Definitions:

Federal Reserve Bank

The central bank of the United States, which performs key functions in the country's financial system.

Interest Rates

The cost of borrowing money, typically expressed as a percentage, which influences economic activity by encouraging or discouraging spending and investment.

Government Securities

financial instruments issued by the government to finance its fiscal deficits, including bonds, bills, and notes, which are considered safe investments.

Federal Reserve Board

This is the governing body of the Federal Reserve System, responsible for overseeing the United States' central banking system and setting monetary policy.