The correct option for demand-pull inflation.
Answer to Problem 7MCQ
From the available options, the correct option is an increase in aggregate demand.
Explanation of Solution
When
When there is an increase in wages then it is a situation that can cause cost-push inflation, not demand-pull inflation but it does not mean that people have very little money.
And, the central bank uses the contractionary
Therefore, the correct option is d (an increase in aggregate demand) and all other options are incorrect.
Introduction: Price level is the average current price of goods and services in the economy that are produced in a particular interval. When supply decreases or remains constant with the increase in aggregate demand, this is demand-pull inflation.
Chapter 33 Solutions
Krugman's Economics For The Ap® Course
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