Inflation that is caused solely by an increase in aggregate demand 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 the aggregate demand in an economy exceeds the aggregate supply, leading to an increase in prices. This can be caused by factors such as an increase in government spending, a rise in exports, or a surge in consumer confidence leading to higher consumer spending. Cost-push inflation, on the other hand, is caused by an increase in input costs, such as wages or raw materials, which drives up prices.

Inflation That Is Caused Solely by an Increase in Aggregate