If increases in total spending are not offset by increases in the supply of goods and services, the average level of prices will rise. Which of the following is responsible?

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is an increase in demand for goods and services that is not matched by a corresponding increase in supply, leading to an increase in prices. In this scenario, total spending is increasing, but there is not enough supply to meet the increased demand, causing prices to go up. Cost-push inflation occurs when costs of production increase and businesses pass those costs on to consumers through higher prices, profit-push pressures do not explain the situation, wage-push pressures occur when labor costs increase and businesses pass those increases on to consumers, and unemployment is not the cause of inflation but rather a result of economic conditions.

If Increases in Total Spending Are Not Offset by Increases