If increases in total spending are not offset by increases in the supply of goods and services, the average price level will rise.Which of the following factors is responsible for this rise?
A)Cost-push inflation
B)Fiscal deficit
C)Demand-pull inflation
D)Wage-push inflation
E)Unemployment

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when the aggregate demand in an economy exceeds the aggregate supply, leading to an increase in the price level. If total spending increases without a corresponding increase in the supply of goods and services, it creates excess demand in the economy leading to demand-pull inflation.

If Increases in Total Spending Are Not Offset by Increases