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WAEC Economics 2003 Question 35

Question 35

Money and Inflation

Cost-push inflation is likely to raise when

  1. A.there is an increase in government spending.
  2. B.there is an increase in direct taxes
  3. C.demand for higher wages is granted
  4. D.there is a decrease in bank lending.
Show the answer and explanation

Answer: C (demand for higher wages is granted)

Explanation

Higher wages raise production costs, and firms pass them on as higher prices: cost-push inflation.