Which of the following could start a demand-pull inflation?
A) an increase in imports
B) a decrease in the quantity of money
C) an increase in government expenditure
D) an increase in the money prices of raw materials

Question

Quizplus · Accepted Answer

An increase in government expenditure can lead to a demand-pull inflation as it increases the demand for goods and services in the economy. This increase in demand leads to a rise in prices, which can further fuel inflation. The other options are not likely to start a demand-pull inflation. An increase in imports may result in increased competition and lower prices. A decrease in the quantity of money may lead to deflation, as there is less money chasing the same amount of goods and services. An increase in the money prices of raw materials may lead to cost-push inflation, where the increased cost of production is passed on to consumers through higher prices.

Which of the Following Could Start a Demand-Pull Inflation