A commodity boom can lead to inflation in the absence of:
A) a tighter fiscal policy.
B) a tighter monetary policy.
C) a looser fiscal policy.
D) a and b
E) b and c

Question

Quizplus · Accepted Answer

A commodity boom can lead to inflation because of the increase in demand for goods and services, which can push up prices. A tighter fiscal policy can help by reducing government spending and increasing taxes, which can reduce the overall demand for goods and services. A tighter monetary policy can also help by limiting the supply of money and credit, which can reduce inflationary pressure. Therefore, options A and B are necessary to prevent or mitigate inflation during a commodity boom. Option C, a looser fiscal policy, would exacerbate inflationary pressures.

A Commodity Boom Can Lead to Inflation in the Absence