Demand-side inflation is normally accompanied by

Question

Quizplus · Accepted Answer

Demand-side inflation occurs when the demand for goods and services exceeds the economy's ability to produce them, leading to rising prices, and rising real GDP. This is because firms increase production to meet the higher demand, leading to an increase in employment and output. In contrast, supply-side inflation occurs when the economy's capacity to produce goods and services is reduced, leading to rising prices and falling real GDP. Therefore, falling real GDP is more commonly associated with supply-side inflation rather than demand-side inflation.

Demand-Side Inflation Is Normally Accompanied by