If the government uses expansionary monetary or fiscal policies to counter the output-effects of cost-push inflation, then the economy is likely to experience:
A) A decline in nominal wages
B) An inflationary spiral
C) A recession
D) Disinflation

Question

Quizplus · Accepted Answer

Expansionary policies increase demand, which can lead to higher prices and wages, potentially causing an inflationary spiral if cost-push inflation is already present.

If the Government Uses Expansionary Monetary or Fiscal Policies to Counter