Demand-pull inflation requires an accompanying increase in the quantity of money.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand increases faster than the economy's ability to supply goods and services. This can lead to an increase in prices. To sustain this increase in demand, there must be an increase in the quantity of money available to consumers and businesses to continue spending at these higher levels. Therefore, demand-pull inflation requires an accompanying increase in the quantity of money.

Demand-Pull Inflation Requires an Accompanying Increase in the Quantity of Money