If the government adopts a hands-off approach to cost-push inﬂation in the economy, then in the short run there is likely to be
A) a rise in real output.
B) a fall in unemployment.
C) an inﬂationary spiral.
D) a recession.

Question

Quizplus · Accepted Answer

A hands-off approach to cost-push inflation means the government does not intervene to control rising prices. This can lead to reduced consumer purchasing power and decreased demand, potentially causing a recession in the short run.

If the Government Adopts a Hands-Off Approach to Cost-Push Inﬂation