Inflation occurs when:
A) Aggregate demand increases faster than unemployment.
B) Unemployment increases faster than the labor force.
C) Aggregate demand increases faster than output.
D) Output increases faster than unemployment.

Question

Quizplus · Accepted Answer

Inflation occurs when aggregate demand (the total amount of goods and services demanded in the economy) increases faster than output (the total amount of goods and services produced). This can happen when there is too much money in circulation, causing people to bid up the prices of goods and services. It is not related to unemployment or the labor force.

Inflation Occurs When