24. An appropriate policy for addressing Demand pull inflation involves A. decre

Question

24. An appropriate policy for addressing Demand pull inflation involves A. decreases in G that have the effect of increasing aggregate demand. B. fiscal tools such as higher personal or corporate income taxes resulting in a decrease in consumer spending and an increase investment spending. C. the elimination of some social programs reducing the level of government spending. D. All of these policies would reduce aggregate demand and NDP. E. None of these policies would reduce aggregate demand and NDP.

Explanation / Answer

The answer is option D. All of these policies would reduce aggregate demand and NDP– Reason because during demand pull inflation the demand in the economy increases which results in increase in pressure on the natural resources. The main reason behind increase in demand pull inflation is the increase in aggregate demand. This can be controlled by the following measure:-

A. decreases in G that have the effect of increasing aggregate demand.

B. fiscal tools such as higher personal or corporate income taxes resulting in a decrease in consumer spending and an increase investment spending.

C. the elimination of some social programs reducing the level of government spending.

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