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- Subject
- Inflation & Productivityeconomics-mcqs › inflation-productivity
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
Explanation
Demand-pull inflation occurs when aggregate demand exceeds aggregate supply. A decrease in interest rates lowers borrowing costs, encouraging more spending and investment, which boosts demand and can lead to demand-pull inflation. The other options either affect costs or supply, not demand.
More Inflation & Productivity MCQs
Practice related questions from the same subject.
- 1.According to the Phillips curve theory, when does unemployment revert to its natural rate?
- 2.What do menu costs signify in the context of inflation?
- 3.What is the effect of a rise in production costs on the economy?
- 4.What is the likely effect on the economy when injections into it increase?
- 5.If both borrowers and lenders agree on a nominal interest rate, but the actual inflation rate ends up being lower than expected, who benefits from this outcome?
- 6.In which scenario would it be most advantageous for you to act as the lender?
- 7.Which of the following statements accurately describes the relationship between nominal interest rate, real interest rate, and inflation?
- 8.What is the real interest rate when the nominal interest rate is 7% and the inflation rate is 3%?
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