Q. The term ‘Inflation Spiral’ is best described as:

[A] A situation where rising demand and stagnant supply lead to continuous price increases.

[B] A process of wage and price interaction where rising wages push up prices, which in turn cause wages to rise further.

[C] A period of high inflation and high unemployment occurring simultaneously.

[D] A temporary price increase of select goods during a recessionary period.

Answer: B
Notes:

Explanation: ‘Inflation Spiral’ is an inflationary situation resulting from a process of wage and price interaction ‘when wages press prices up and prices pull wages up’. This is also known as the wage-price spiral5.

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