Which of the following policies might create demand-pull inflation
A)A decrease government spending
B)An increase in interest rates
C)A cut in taxes
D)All of these policies could create demand-pull inflation

Question

Quizplus · Accepted Answer

A cut in taxes would increase disposable income of consumers, leading to an increase in demand for goods and services. This increase in demand would cause firms to increase their prices, leading to demand-pull inflation. Decrease in government spending and an increase in interest rates would lead to a decrease in demand and would not create demand-pull inflation.

Which of the Following Policies Might Create Demand-Pull Inflation