Which of the following would be considered an example of demand-pull inflation?
A. Rice prices increase due to drought
B. Oil prices increase after a war in the Middle East
C. Consumers spend more due to Christmas bonuses
D. Sugar prices rise due to import bans
Answer (1)
The correct answer is letter C. Consumers spend more due to Christmas bonusesWhen people have more money and start spending more, it increases aggregate demand, which can lead to demand-pull inflation. This often happens in the Philippines during the "ber months" (September to December), when workers receive their 13th-month pay and bonuses.Stores become crowded, prices of gifts, groceries, and even fares rise. Since more people are chasing the same amount of goods, sellers raise their prices. This is classic demand-pull inflation, where the “pull” comes from the consumers’ willingness to spend more.In contrast, the other options involve cost-push inflation, because they’re caused by supply problems, not by increased demand.
