Inflation spiral refers to a situation where wages and prices are intertwined in a cycle of continuous increase. In this scenario, wages rise, which in turn leads to an increase in prices, and this increase in prices further pushes wages up. It creates a self-reinforcing loop where both wages and prices continue to rise, causing inflationary pressures in the economy.

Here is a detailed explanation of why option 'A' is the correct answer:

1. Wages press prices up:
When wages increase, it means that workers have more disposable income to spend on goods and services. This higher purchasing power of consumers leads to an increase in demand for goods and services. As demand rises, producers and businesses often respond by increasing prices to maximize their profits. Therefore, an increase in wages can put upward pressure on prices.

2. Prices pull wages up:
As prices increase due to higher demand, the cost of living also rises. This means that workers need more income to maintain their standard of living. To compensate for the increased cost of living, workers demand higher wages from their employers. If businesses agree to meet these demands, wages will increase to match the rising prices in the economy.

3. Continuous upward pressure:
The cycle continues as the increase in wages leads to higher prices, and higher prices, in turn, lead to higher wages. This continuous upward pressure on both wages and prices creates an inflationary spiral. If left unchecked, it can lead to a significant increase in the overall price level in the economy.

4. Consequences of an inflation spiral:
An inflation spiral can have several negative consequences for the economy. Firstly, it erodes the purchasing power of individuals as prices rise faster than wages. This can lead to a decrease in the standard of living for many people. Secondly, businesses may struggle to manage rising costs, which can result in reduced profits and potentially lead to layoffs or closures. Lastly, high and unstable inflation can create uncertainty and make it difficult for businesses to plan and invest in the long term.

In conclusion, an inflation spiral is a situation where wages and prices are caught in a cycle of continuous increase. As wages press prices up and prices pull wages up, it creates a self-reinforcing loop that leads to inflationary pressures in the economy. It is essential for policymakers to monitor and manage this cycle to maintain price stability and ensure the well-being of both workers and businesses.