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Demand Pull Inflation

Which of the following policies would decrease demand-pull inflation?
a. An increase in excess reserves.
b. The FED buying government securities.
c. Incomes policies.
d. A reduction in resource prices.

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Solution Preview

Demand-pull inflation occurs when aggregate demand in an economy is greater than aggregate supply.

a. An increase in excess reserves ...

Solution Summary

Based on the four choices, the solution identifies a policy that would decrease demand-pull inflation.