Inflation that is caused by an increase in aggregate demand without any change in aggregate supply is called
A)demand-push inflation.
B)demand-pull inflation.
C)cost-push inflation.
D)cost-pull inflation.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when an increase in aggregate demand causes prices to rise, but there is no corresponding increase in aggregate supply. This can happen when consumer spending increases or when the government injects money into the economy through policies such as tax cuts or increased spending. It is characterized by high demand and low supply, resulting in price increases. Option A is incorrect because demand-push inflation is not a recognized term. Option C is cost-push inflation, which occurs when there is a decrease in aggregate supply, leading to higher production costs and pushing up prices. Option D is not a recognized term.

Inflation That Is Caused by an Increase in Aggregate Demand