Which of the following can cause demand-pull inflation if the economy is currently in equilibrium at full-employment GDP?
A)an increase in net exports
B)a reduction in government spending
C)an increase in the company income tax rate
D)a decrease in real wages

Question

Quizplus · Accepted Answer

An increase in net exports would increase aggregate demand, leading to an increase in the price level, resulting in demand-pull inflation. The other options would have opposite effects on aggregate demand, leading to a decrease in the price level and deflation.

Which of the Following Can Cause Demand-Pull Inflation If the Economy