Which of the following can cause supply-side inflation?
A) an increase in human capital
B) increases in the money supply
C) tax cuts
D) none of the above

Question

Quizplus · Accepted Answer

Supply-side inflation occurs when there is a decrease in the supply of goods and services relative to demand. An increase in human capital (A) would lead to increased productivity and an increase in the supply of goods and services, therefore not causing supply-side inflation. Increases in the money supply (B) may potentially cause demand-pull inflation but not supply-side inflation. Tax cuts (C) may incentivize production and investment, leading to an increase in the supply of goods and services and ultimately preventing supply-side inflation. Therefore, none of the choices listed can cause supply-side inflation.

Which of the Following Can Cause Supply-Side Inflation