Which of the following would be expected to cause a sustained increase in the inflation rate rather than a once- and- for- all increase in the price level?

Question

Quizplus · Accepted Answer

Expectations of higher future inflation can lead to a sustained increase in the inflation rate as individuals and firms adjust their behavior based on their belief that prices will continue to rise in the future. This can lead to a self-fulfilling prophecy as higher inflation expectations lead to higher inflation. The other options may cause a temporary increase in the price level, but are less likely to lead to a sustained increase in the inflation rate.

Which of the Following Would Be Expected to Cause a Sustained