Question

The government in an economy recently reduced the tax rates on income for individuals. This prompted an increase in consumer spending, as consumers' income was effectively increased by the reduction in tax rates. The government notices that since the change in tax rates, prices have begun to increase throughout the economy and the inflation rate is increasing. What type of inflation is occurring in the economy?(1 point) Responses cost-push inflation cost-push inflation demand-pull inflation demand-pull inflation disinflation disinflation deflation deflation

Answer 1

Cost-push inflation