Which of the following factors could cause the economy to experience supply-side inflation?
A) Increased security about jobs and future income.
B) Government laws which say that the average work week must be reduced by one hour every year.
C) Increase the number of immigrants allowed into the country.
D) Develop new technology to increase productivity.

Question

Quizplus · Accepted Answer

Government laws which reduce the average work week each year would decrease the available supply of labor, leading to increased wages and prices. This is an example of supply-side inflation.

Note: A, C, and D are not factors that would cause supply-side inflation. Increased job security and future income would have more of an impact on demand-side inflation, an increase in immigration would likely have little impact on inflation, and new technology to increase productivity would actually help to decrease inflationary pressures.

Which of the Following Factors Could Cause the Economy to Experience