Which of the following is likely to be inflationary?

A. taxes increase
B. increase in unemployment
C. budget surplus
D. wages increase

Correct Answer:

Option D = wages increase

Explanation

Increment in wages and salaries will lead to inflation. This happens when business owners raise the minimum wage, leading to a corresponding rise in the prices of their goods or services, thereby causing inflation.

Remember inflation happens when there is excess money in the economy, thereby causing a general rise in prices.