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Questions and Answers
What is the main cause of demand-pull inflation?
What is the main cause of demand-pull inflation?
- Decrease in taxes leading to increased disposable income
- Decrease in money supply by the central bank
- Increase in government spending on infrastructure projects (correct)
- Increase in savings rate leading to decreased consumer spending
Which factor is most likely to contribute to cost-push inflation?
Which factor is most likely to contribute to cost-push inflation?
- Increase in government subsidies for essential goods
- Decrease in production costs due to technological advancements
- Decrease in oil prices leading to lower transportation costs
- Increase in wages due to strong labor union negotiations (correct)
What effect does hyperinflation have on the economy?
What effect does hyperinflation have on the economy?
- Promotes sustainable economic growth and development
- Encourages long-term investment due to stable prices
- Leads to a decrease in the velocity of money circulation
- Reduces the real value of money and savings (correct)
