Question

Demand-pull inflation occurs when

Answer 1

The fourth alternative is correct (D).

Demand inflation occurs when demand for goods and services exceeds supply.

Let us assume an economy that has a rigid productive structure, that is, it can not increase production in the short term, only in the long run. If the economy goes through a monetary shock, as happens if the government prints and injects money into the economy, the excess money in the hands of consumers will increase the demand for the goods. However, as the productive structure does not support the increase in production, demand will be greater than supply and this will cause demand inflation.

Answer 2

Answer:

d

Explanation: