Demand-pull inﬂation can be restrained by increasing government spending and reducing taxes.

Question

Quizplus · Accepted Answer

Increasing government spending and reducing taxes are expansionary fiscal policies that stimulate aggregate demand, leading to an increase in prices and exacerbating demand-pull inflation rather than restraining it. To restrain demand-pull inflation, contractionary fiscal policies that reduce aggregate demand, such as reducing government spending and increasing taxes, are more appropriate.

Demand-Pull Inﬂation Can Be Restrained by Increasing Government Spending and Reducing