Long-term inflation is principally
A)the result of chronic federal budget deficits.
B)the result of the slowdown in the growth rate of aggregate supply since 1973.
C)caused by excess wage demands by unionized workers.
D)a monetary phenomenon.

Question

Quizplus · Accepted Answer

Long-term inflation is primarily caused by an increase in the money supply relative to the availability of goods and services in the economy, which is a monetary phenomenon. Chronic federal budget deficits and excess wage demands by unionized workers can contribute to short-term inflation, but they are not the primary drivers of long-term inflation. The slowdown in the growth rate of aggregate supply since 1973 can also contribute to inflation, but it is not as significant as the monetary factors.

Long-Term Inflation Is Principally