There is a tendency for demand-pull inflationary pressure to increase as the economy approaches full employment.

Question

Quizplus · Accepted Answer

As the economy approaches full employment, the available labor and resources become scarcer, leading to increased costs for these inputs. Businesses often pass these costs on to consumers in the form of higher prices, contributing to demand-pull inflation. This occurs because demand for goods and services continues to rise while the supply cannot increase proportionately due to the economy operating near its capacity.

There Is a Tendency for Demand-Pull Inflationary Pressure to Increase