More inflation is likely to result when the government enacts policies to maintain full employment when there is cost-push inflation.

Question

Quizplus · Accepted Answer

When the government enacts policies to maintain full employment during cost-push inflation, there may be an increase in demand for labor which can lead to higher wages and increased production costs. This can exacerbate cost-push inflation and lead to even higher levels of inflation.

More Inflation Is Likely to Result When the Government Enacts