What type of inflation occurs when demand is greater than supply?
A. Demand-pull inflation
B. Cost-push inflation
C. Asset inflation
D. Deflation
Answer (2)
The correct answer is A. Demand-pull inflation.Demand-pull inflation happens when the demand for goods and services exceeds the available supply. This increased demand "pulls" prices up because more consumers are competing to buy a limited amount of products, leading sellers to raise prices. It often occurs in a growing economy with rising incomes and consumer confidence.
The correct answer is letter A. Demand-pull inflationDemand-pull inflation happens when people and businesses are buying more goods than the economy can produce. When demand is higher than supply, sellers raise prices because many people want the same limited products.For example, during the Christmas season in the Philippines, there is a surge in consumer demand. People shop more, travel more, and spend their bonuses. Businesses respond by increasing prices because they know people are willing to spend. This causes inflation that is "pulled" by the demand from consumers.
