Question

Which of the following has the potential to cause inflation?

a raising interest rates
b. raising taxes
c lowering interest rates
d lowering taxes

Answer 1

It is lowering interest rates

Answer 2

I believe the answer is: d lowering taxes

When we lower taxes, the amount of disposable income that people have would increase. When this happen, the amount of money that they use for spending would tend to increase. This would increase the amount of money circulated in the market and create an inflation.