To prevent demand- pull inflation
A) real GDP must increase.
B) the natural unemployment rate must increase.
C) firms must refuse to increase wages.
D) the Fed must not let the quantity of money persistently rise.

Question

Quizplus · Accepted Answer

Demand-pull inflation is caused by an increase in aggregate demand, which can be fueled by an increase in the quantity of money in the economy. Therefore, to prevent demand-pull inflation, the Fed must not let the quantity of money persistently rise. This can be achieved through monetary policy tools, such as adjusting interest rates and open market operations.

To Prevent Demand- Pull Inflation