Which of the following could trigger demand-side inflation?

Question

Quizplus · Accepted Answer

An increase in government spending can lead to an increase in demand for goods and services in the economy, which can lead to demand-pull inflation. This is because when people have more money to spend, they are willing to pay more for goods and services, and businesses can increase their prices without losing customers. Therefore, an increase in government spending can trigger demand-side inflation.

The other choices (A, B, and D) could actually lead to a decrease in demand and lower inflation. For example, a decrease in the money supply (A) can lead to lower spending and lower inflation, an increase in taxes (B) can decrease consumer spending and lower demand, and an increase in interest rates (D) can discourage borrowing and spending, also leading to lower demand and lower inflation.

Which of the Following Could Trigger Demand-Side Inflation