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

Question

Quizplus · Accepted Answer

In a demand-pull inflation scenario, an increase in aggregate demand leads to higher demand for labor, which can create a labor shortage. This shortage puts upward pressure on wages as employers compete for a limited pool of workers.

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