Which type of inflation is caused by an increase in overall consumer demand?
Answer (2)
The type of inflation caused by rising consumer demand is called demand-pull inflation. This happens when many people, businesses, or even the government want to buy more goods and services than the economy can produce at the moment. Because the supply of products is limited and everyone wants to buy, sellers start increasing their prices.In the Philippines, this sometimes happens during election years when government spending increases due to infrastructure projects or cash programs. More money circulates, people have more to spend, and businesses try to meet that demand—but when supply can’t keep up, prices rise.Another example is the sudden demand for face masks and alcohol during the COVID-19 pandemic. Everyone wanted to buy these items at once, but factories couldn’t keep up with the orders. This caused a sharp increase in prices.Demand-pull inflation is often a sign of a growing economy, but if not managed well, it can lead to long-term inflation problems. To control it, the government or central bank (like the Bangko Sentral ng Pilipinas) might raise interest rates to reduce spending and borrowing. This helps lower demand and slow down inflation.
The type of inflation caused by an increase in overall consumer demand is demand-pull inflation.Demand-pull inflation occurs when the demand for goods and services in an economy exceeds the available supply. As more consumers want to buy products, businesses respond by raising prices, leading to inflation. This often happens in a growing economy where employment and income levels are high, increasing people's purchasing power.
