When businesses and workers start to expect higher inflation:
A) prices and wages tend to fall.
B) output tends to rise.
C) the economy moves into recession.
D) prices and wages tend to rise.

Question

Quizplus · Accepted Answer

When businesses and workers expect higher inflation, they often adjust their behavior by raising prices and seeking higher wages to maintain purchasing power, leading to an actual increase in prices and wages.

When Businesses and Workers Start to Expect Higher Inflation