Demand-pull inflation is caused by
A)An increase in aggregate supply.
B)An increase in resource costs as an economy's production capacity is approached.
C)An increase in inventories.
D)Excessive aggregate demand in relation to an economy's production capacity.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand exceeds the available supply of goods and services in an economy. As a result, prices increase to reflect the imbalance between supply and demand. This type of inflation can occur due to factors like an increase in government spending, a rise in consumer confidence, or an expansionary monetary policy. It is not caused by an increase in aggregate supply (choice A), an increase in resource costs (choice B), or an increase in inventories (choice C).

Demand-Pull Inflation Is Caused by