When the economy is experiencing cost-push inﬂation, an inﬂationary spiral is likely to result when
the government adopts a hands-off policy.

Question

Quizplus · Accepted Answer

Cost-push inflation typically results from increased costs of production or supply shortages, leading to higher prices. An inflationary spiral, where inflation leads to higher wages, leading to higher prices, and so on, is more often associated with demand-pull inflation and might not directly result from a hands-off policy in the context of cost-push inflation. Government intervention or lack thereof can influence the outcome, but a hands-off policy alone does not necessarily lead to an inflationary spiral in the context of cost-push inflation.

When the Economy Is Experiencing Cost-Push Inﬂation, an Inﬂationary Spiral