Multiple choice

If the demand for goods and services is more than their supply, then the resultant inflation is

  1. cost-push inflation

  2. stagflation

  3. hyper inflation

  4. demand-pull inflation

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When aggregate demand exceeds aggregate supply in an economy, it creates demand-pull inflation. This occurs because too much money is chasing too few goods, pushing prices up. Cost-push inflation arises from increased production costs, stagflation combines high inflation with stagnant growth, and hyperinflation is extremely rapid inflation typically exceeding 50% per month.

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