ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
Which of the following best describes demand-pull inflation?
Demand-pull inflation is a rise in the general price level caused by aggregate demand growing faster than the economy can supply goods and services. Rising input costs are cost-push inflation, and a fall in prices from weak spending is deflation.
- ARising prices caused by aggregate demand growing faster than the economy's ability to supply goods and servicesCorrect
- BRising prices caused by an increase in the cost of raw materials and wages
- CA fall in the general level of prices caused by weak consumer spending
Explanation
Demand-pull inflation occurs when aggregate demand exceeds the economy's productive capacity, so prices are pulled upwards. Rising input costs describe cost-push inflation, and falling prices describe deflation.
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