Question

The inflationary spiral explains the causes and effects of high inflation.

The spiral usually begins with an increase in demand. What is the direct effect of this increase?

a. Producers raise prices to continue to make a profit.
b. The government prints more money, lowering the value of money.
c. Workers negotiate with employers to receive more money.
d. Consumers need higher wages to keep up with rising prices.

Answer 1

Answer:

A. Producers raise prices to continue to make a profit.

Explanation:

Answer 2

The direct result of increase in demand is that the producers raise prices to continue to make a profit.

So, option a. is correct.

Inflationary spiral

Inflation is defined as a broad, gradual increase in the costs of goods and services in a market. An inflationary spiral starts when there is an increase in price, which leads to people requesting pay increases.

The inflationary spiral describes why and how high inflation occurs. Typically, the spiral begins with a rapid growth. The direct result of this increase is that the producers raise prices to continue to make a profit. So, option a. is correct.

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