If Increases in Total Spending Are Not Offset by Increases

question 114

Multiple Choice

If increases in total spending are not offset by increases in the supply of goods and services, the average price level will rise.Which of the following factors is responsible for this rise?

• A)Cost-push inflation
• B)Fiscal deficit
• C)Demand-pull inflation
• D)Wage-push inflation
• E)Unemployment

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Definitions:

Market-Equilibrium

A condition where the supply and demand in the market equalize, leading to stable prices.

External Cost

A cost borne by individuals or society that is not reflected in the market price of a good or service, often associated with negative externalities.

Socially Optimal

A condition or point at which the welfare of a society reaches its highest possible level, considering all factors and resources.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded.