ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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rise in price due to a decrease in supply
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a rise in price level due to an increase in demand
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a decrease in price due to an increase in supply
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a decrease in price due to a decrease in supply
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Detailed explanation-1: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply. As consumers demand more given limited supply, prices are bid higher.
Detailed explanation-2: -Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases. When supply cannot meet growing demand, prices for goods and services are pulled higher.
Detailed explanation-3: -Demand-pull inflation can be caused by an expanding economy, increased government spending, or overseas growth.
Detailed explanation-4: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.
Detailed explanation-5: -A. A reduction in interest rates. B. An increase in costs. C. A reduction in government spending. D. An outward shift in aggregate supply.