The economy starts out at a full- employment equilibrium.Some events then occur that generate a demand- pull inflation.All of the following events except an increase in _______ might start a demand- pull inflation.

Question

Quizplus · Accepted Answer

Demand-pull inflation is caused by an increase in demand or in the supply of money, which does not include an increase in the money wage rate. Increases in government expenditure, transfer payments, the quantity of money, and exports all boost demand, but an increase in the money wage rate affects the cost of production and is more related to cost-push inflation.

The Economy Starts Out at a Full- Employment Equilibrium