Demand-side inflation differs from supply-side inflation in which of the following ways?
A)Demand-side inflation has higher output; supply-side inflation has lower output.
B)Demand-side inflation has lower output; supply-side inflation has higher output.
C)Demand-side inflation is always followed by stagflation; supply-side inflation is always followed by demand-side inflation.
D)Demand-side inflation has a self-correcting mechanism; supply-side inflation does not.

Question

Quizplus · Accepted Answer

Demand-side inflation, also known as demand-pull inflation, occurs when the aggregate demand in an economy outpaces aggregate supply, often leading to higher output as businesses increase production to meet demand. Supply-side inflation, or cost-push inflation, happens when there's an increase in the cost of production (like raw materials or wages), which can lead to lower output as it becomes more expensive for businesses to produce goods and services.

Demand-Side Inflation Differs from Supply-Side Inflation in Which of the Following