Inflation is primarily caused by which of the following? (2023)

Practice Questions

Q1
Inflation is primarily caused by which of the following? (2023)
  1. Increased demand
  2. Decreased supply
  3. Higher taxes
  4. Lower interest rates

Questions & Step-by-Step Solutions

Inflation is primarily caused by which of the following? (2023)
  • Step 1: Understand what inflation means. Inflation is when prices of goods and services increase over time.
  • Step 2: Recognize that inflation can happen for different reasons, but we are focusing on one main cause.
  • Step 3: Identify that one main cause of inflation is when more people want to buy goods and services than what is available.
  • Step 4: Realize that when demand (the desire to buy) is higher than supply (the amount available), prices go up.
  • Step 5: Conclude that increased demand for goods and services, which outstrips supply, is the primary cause of inflation.
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