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WAEC Economics 2016 Question 37

Question 37

Money and Inflation

Cost-push inflation is likely to arise when

  1. A.there is an increase in bank lending.
  2. B.there is an increase in subsidies.
  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, which firms pass on as higher prices.