What causes demand-pull inflation?
A) an inward shift of the aggregate demand curve
B) an inward shift of the aggregate supply curve
C) an outward shift of the aggregate demand curve
D) an outward shift of the aggregate supply curve

Question

What causes demand-pull inflation?  
A) an inward shift of the aggregate demand curve 
B) an inward shift of the aggregate supply curve 
C) an outward shift of the aggregate demand curve 
D) an outward shift of the aggregate supply curve

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is an increase in aggregate demand, leading to an upward pressure on prices. This can result from an increase in consumer spending, government spending, or exports, or from a decrease in taxes or interest rates. An outward shift of the aggregate demand curve causes an increase in demand and can lead to demand-pull inflation. On the contrary, an inward shift of the aggregate demand curve or any shift in the aggregate supply curve affects the price levels in a different way. Therefore, option A, B, and D are incorrect.

What Causes Demand-Pull Inflation