ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A decrease in interest rates on business investment
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The price of steel decreases sharply
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Productivity increases
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Consumer confidence plummets
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New government regulations on businesses
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Detailed explanation-1: -Demand-pull inflation can be caused by an expanding economy, increased government spending, or overseas growth.
Detailed explanation-2: -This type of inflation is caused due to an increase in aggregate demand in the economy.
Detailed explanation-3: -Causes of demand-pull inflation Lower interest rates. A cut in interest rates causes a rise in consumer spending and higher investment. This boost to demand causes a rise in AD and inflationary pressures. The rise in house prices.
Detailed explanation-4: -For example, if manufacturing tires suddenly becomes twice as expensive, the prices of those tires will also increase, causing inflation. This could even affect the car market, as car manufacturers will need to pay more to complete their vehicles.
Detailed explanation-5: -A. A reduction in interest rates. B. An increase in costs. C. A reduction in government spending. D. An outward shift in aggregate supply.