Inflation may occur if

Step 1: Analyze the question We are asked which situation can cause inflation, which is a persistent, general rise in the price level over time.

Step 2: The concept Inflation happens when too much money chases too few goods (demand-pull), or when production costs rise and push prices up (cost-push). A wage increase without a matching rise in output raises production costs and also increases spending power, so the price level goes up.

Step 3: Evaluate each option

• A. Productivity rate higher than wage rate: Workers produce more than they are paid for, so unit costs fall. This reduces inflationary pressure, so it is not a cause.
• B. Seasonal price fluctuations: Prices of items like tomatoes or yams rise and fall with the season. This is temporary and not a persistent, general price rise, so it is not true inflation.
• C. Wage increase without an increase in productivity: Firms' costs rise (cost-push), and workers have more money to spend while the quantity of goods stays the same (demand-pull). Prices rise, so this can cause inflation.
• D. Restrictive monetary policies: These reduce money supply (higher interest rates, higher cash reserve requirements). They are used to fight inflation, not cause it.

Step 4: Answer

Tip: Remember "more money, same goods = higher prices." Whenever an option shows income or money supply rising without more output, it points to inflation. Whenever it shows restrictive or tight policy, it points to controlling inflation.