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JAMB Economics 1983 Question 15

Question 15

Money and Inflation

The meaning of 'wage-price spiral' is

  1. A.demand pull and cost push inflation pulling each other in different directions
  2. B.demand pull and cost push inflation intensifying each other
  3. C.both of them bringing about a reduction in the price level
  4. D.that demand pull and cost push inflation increases employment
  5. E.that wages and prices are rising at a proportional rate.
Show the answer and explanation

Answer: B (demand pull and cost push inflation intensifying each other)

Explanation

Rising prices lead workers to demand higher wages, which raise costs and prices again: demand-pull and cost-push inflation feed each other.