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WAEC Economics 2020 Question 35

Question 35

Money and Inflation

Inflation may occur if

  1. A.rate of productivity is higher than wage rate.
  2. B.prices fluctuate during a particular season of the year.
  3. C.wage increase is granted without increase in productivity.
  4. D.the government embarks on restrictive monetary policies.
Show the answer and explanation

Answer: C (wage increase is granted without increase in productivity.)

Explanation

Higher wages without more output raise costs and prices (cost-push inflation).