To Prevent Demand-Pull Inflation

question 179

Multiple Choice

To prevent demand-pull inflation,

• A)firms must refuse to increase the money wage rate.
• B)firms must refuse to increase the real wage rate.
• C)the Fed must not let the quantity of money persistently rise.
• D)the natural unemployment rate must increase.
• E)real GDP must increase.

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Definitions:

MPC (Marginal Propensity To Consume)

The ratio of the change in consumption to the change in income, indicating how income changes affect spending.

Multiplier

An economic factor that quantifies the effect of investment on income, showing how much economic activity is generated by a given increase in spending.

Budget Act

Legislation that governs the budgetary process of a government, setting forth the procedures for proposing, reviewing, and implementing a budget.

Federal Deficit

The shortfall when the U.S. government's expenditures exceed its revenues in a fiscal year.