Demand-pull inflation is caused by:
A)high unemployment of resources in the economy.
B)increase in tax rates by the government.
C)trade unions' pressure for wage hike.
D)increased spending when the economy is producing at maximum capacity.
E)the supply side of the market.

Question

Quizplus · Accepted Answer

Demand-pull inflation is caused by increased spending when the economy is producing at maximum capacity. This happens when the demand for goods and services exceeds the supply and causes prices to rise. A high level of unemployment (A), increase in tax rates (B), and pressure from trade unions for wage hikes (C) are not causes of demand-pull inflation. The supply side of the market (E) can influence prices, but it is not a direct cause of demand-pull inflation.

Demand-Pull Inflation Is Caused By