Assume that the number of people wanting to buy homes increases sharply in your local area. The price of homes will likely ______, which is an example of ______.

Question

Quizplus · Accepted Answer

An increase in demand for homes will likely lead to an increase in the price of homes, which is an example of demand-pull inflation. Cost-push inflation occurs when the cost of production increases, which in turn leads to an increase in prices. However, this scenario involves an increase in demand, not an increase in production costs, so it is not an example of cost-push inflation. The answer cannot be B or D because they both suggest a decrease in price, which contradicts the scenario of a sharp increase in demand.

Assume That the Number of People Wanting to Buy Homes