An inflationary spiral can emerge when
A)Desired spending at full employment falls short of full-employment output.
B)Desired saving falls short of desired investment at full employment.
C)Actual investment exceeds desired investment.
D)Desired leakages exceed desired injections.

Question

Quizplus · Accepted Answer

A situation where desired saving falls short of desired investment at full employment can lead to an inflationary spiral. This is because demand for goods and services exceeds the supply, causing prices to rise. As prices rise, people may feel the need to spend more to maintain their standard of living, which leads to further price increases. This vicious cycle can continue and result in higher inflation.

An Inflationary Spiral Can Emerge When