To prevent cost-push inflation
A) interest rates must not rise.
B) the Fed must not let the quantity of money rise persistently.
C) there must not be an excess demand for money.
D) there must not be an increase in government purchases.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when costs of production increase, which leads to an increase in prices. To prevent this type of inflation, the Fed must not let the quantity of money rise persistently, as an increase in the money supply can lead to higher production costs due to increased demand for inputs. Therefore, controlling the money supply is important for reducing cost-push inflation. The other options (A, C, and D) are not directly related to preventing cost-push inflation.

To Prevent Cost-Push Inflation