In the case of demand-pull inflation, other things being equal:
A) both the inflation rate and the unemployment rate rise at the same time.
B) the unemployment rate rises but the inflation rate falls.
C) the inflation rate rises but the unemployment rate falls.
D) both the inflation rate and the unemployment rate fall.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when demand for goods and services exceeds supply, leading to an increase in prices. As a result, the inflation rate rises, but the unemployment rate falls because businesses must hire more workers in order to meet the increased demand. Therefore, option C is the best choice.

In the Case of Demand-Pull Inflation, Other Things Being Equal