In a demand-pull inflation, money wage rates rise because
A) a decrease in aggregate demand creates a labor shortage.
B) an increase in aggregate demand creates a labor surplus.
C) an increase in aggregate demand creates a labor shortage.
D) a decrease in aggregate demand creates a labor surplus.

Question

Quizplus · Accepted Answer

In a demand-pull inflation scenario, an increase in aggregate demand can lead to a labor shortage as employers compete to hire more workers to meet the increased demand for their products or services. This competition can drive up wages.

In a Demand-Pull Inflation, Money Wage Rates Rise Because