Demand-pull inflation can develop when
A)There is a shortage of investment and investors bid up interest rates.
B)Inventories shrink and consumers bid up prices.
C)There is a surplus of resources and so wages are bid up by employers.
D)Undesired investment occurs.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is an increase in demand for goods and services that exceeds the available supply. This can lead to a rise in prices as consumers compete to buy the limited quantity of goods available, causing sellers to increase their prices to capture more profit. When inventories shrink, there is less supply available, leading to higher prices as consumers bid up prices to get what they want.

Demand-Pull Inflation Can Develop When