To prevent demand-pull inflation,
A)firms must refuse to increase the money wage rate.
B)firms must refuse to increase the real wage rate.
C)the Fed must not let the quantity of money persistently rise.
D)the natural unemployment rate must increase.
E)real GDP must increase.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is excessive demand in relation to supply, leading to upward pressure on prices. The most effective way to prevent this type of inflation is to control the quantity of money in the economy. If the Fed allows the quantity of money to persistently rise, it will lead to an increase in demand, which can cause inflation. Therefore, the Fed must control the quantity of money in the economy to prevent demand-pull inflation. The other options do not directly address the prevention of demand-pull inflation.

To Prevent Demand-Pull Inflation