Which of the following is a correct statement?
A) It is relatively easy to distinguish between cost-push and demand-pull inﬂation even if you don't know the source of the inﬂation.
B) A supply shock will cause a variation of demand-pull inﬂation that can lead to hyperinﬂation.
C) Demand-pull inﬂation will continue so long as there is excess total spending in the economy.
D) Demand-pull inﬂation is usually accompanied by higher unemployment rates.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is excess total spending in the economy. Therefore, it will continue as long as there is excess spending. Option A is incorrect since it is difficult to distinguish between cost-push and demand-pull inflation without knowing the source. Option B is incorrect since a supply shock can lead to cost-push inflation, not demand-pull inflation. Option D is incorrect since demand-pull inflation is usually associated with low unemployment rates, as increased demand for goods and services leads to increased hiring.

Which of the Following Is a Correct Statement