Once wartime spending is under way and production is diverted away from household consumption items and private investment goods,

Question

Quizplus · Accepted Answer

When production is diverted away from household consumption items and private investment goods, there may be a shortage of those goods in the market, leading to an increase in their prices, which is inflation. If productivity does not increase to meet the increased demand, inflation is likely to occur.

Once Wartime Spending Is Under Way and Production Is Diverted