Question

Once an economy has high and persistent inflation rates, what would be the most likelyexplanationfor such inflation? a.The imported goods from abroad have become expensive in the countries they have been produced. b.The central bank is creating excessive amounts of money.c.Labor unions are using their power for bargaining for excessively high wages.d.The international price of oil has increased suddenly, and since it is a major source of energy, the finished costs of products have increased.e.Thegovernment is imposing excessive levels of taxationto the buyers and sellers.f.Monopolistic firms are using their monopoly power to enforce excessive price hikes.

Answer 1

b.The central bank is creating excessive amounts of money.

Explanation: When the money supply grows faster than the real output, it creates sustained inflation.