A one-time rise in the price level can turn into a demand-pull inflation when
A) the money wage rate continues to increase.
B) the quantity of money persistently decreases.
C) taxes consistently increase.
D) the quantity of money persistently increases.

Question

Quizplus · Accepted Answer

A one-time rise in the price level can turn into demand-pull inflation if the quantity of money in the economy persistently increases, leading to more money chasing the same amount of goods and services, thus continuously pushing prices higher.

A One-Time Rise in the Price Level Can Turn into a Demand-Pull