Inflation can come from the demand side or from the supply side of the economy.

Question

Quizplus · Accepted Answer

Demand-pull inflation happens when the aggregate demand in an economy exceeds its aggregate supply, putting upward pressure on prices. On the other hand, cost-push inflation occurs when the prices of production inputs, such as labor or raw materials, increase and lead to higher prices for finished goods and services. Both factors can contribute to inflation in an economy.

Inflation Can Come from the Demand Side or from the Supply