Consumer confidence in the economy increases greatly, and consumers increase spending significantly. Production does not increase as fast, and prices rise. This scenario describes:

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When consumer confidence in the economy increases greatly and consumers increase spending significantly, there is an increase in demand for goods and services. However, if production does not increase to keep up with this increased demand, prices will rise, leading to demand-pull inflation. Cost-push inflation occurs when production costs increase and firms raise prices to maintain profits. Unanticipated deflation occurs when there is a decline in the general price level, which is not expected by consumers and businesses. A negative output gap occurs when actual output is below potential output.

Consumer Confidence in the Economy Increases Greatly, and Consumers Increase