If government uses its stabilization policies to maintain full employment under conditions of cost-push inflation,
A)a deflationary spiral is likely to occur.
B)an inflationary spiral is likely to occur.
C)stagflation is likely to occur.
D)the Phillips Curve is likely to shift inward.

Question

Quizplus · Accepted Answer

Using stabilization policies to maintain full employment during cost-push inflation can lead to an inflationary spiral, as efforts to boost demand may further increase prices without addressing the underlying cost-push factors.

If Government Uses Its Stabilization Policies to Maintain Full Employment