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    Question

    Which of the following situations will result after high

    growth?
    A Inflation Correct Answer Incorrect Answer
    B Deflation Correct Answer Incorrect Answer
    C Recession Correct Answer Incorrect Answer
    D Creeping Inflation Correct Answer Incorrect Answer

    Solution

    Inflationcaused by economicgrowth. Typically,higher inflationis caused bystrongeconomicgrowth. If Aggregate Demand (AD) in an economy expands faster than aggregate supply, we would expect to see ahigher inflationrate. This fall in unemployment puts upward pressure on wages whichleadstohigher inflation.

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