Increases in the level of total spending in the economy:
A) always cause the levels of output and employment to go up.
B) may, under certain circumstances, lead to demand-pull inflation.
C) may cause a recession if too many wants and needs are satisfied.
D) are always desirable since they increase the level of economic activity.

Question

Quizplus · Accepted Answer

Increases in the level of total spending in the economy can lead to demand-pull inflation under certain circumstances, especially when demand outpaces the economy's ability to produce goods and services, leading to upward pressure on prices.

Increases in the Level of Total Spending in the Economy