In a demand-pull inflation brought about by increases in the quantity of money, real GDP might increase at times because
A) real wages fall.
B) money wages fall.
C) real wages rise.
D) tax rates decline.

Question

Quizplus · Accepted Answer

When the quantity of money increases, it can lead to higher demand for goods and services, causing prices to rise. If nominal wages do not increase as quickly as prices, real wages (purchasing power) fall, potentially encouraging firms to hire more workers and increase production, thus increasing real GDP.

In a Demand-Pull Inflation Brought About by Increases in the Quantity