Demand-pull inﬂation
A) occurs when prices of resources rise, pushing up costs and the price level.
B) occurs when total spending exceeds the economy's ability to provide output at the existing price level.
C) occurs only when the economy has reached its absolute production capacity.
D) is also called cost-push inﬂation.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when total spending (demand) exceeds the economy's ability to provide output at the existing price level. This means that consumers are willing to pay more for goods and services than what suppliers are able to produce. It is characterized by an increase in the overall price level due to excess demand. A, C, and D are incorrect statements that do not accurately describe demand-pull inflation.

Demand-Pull Inﬂation