Demand-pull inflation can start
A)aggregate demand increases.
B)aggregate supply decreases.
C)input costs rise.
D)people incorrectly forecasting inflation.
E)unemployment that is above the natural rate.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in the economy increases, leading to higher prices as businesses are unable to keep up with the higher demand. This can happen due to factors such as increased consumer confidence, government spending, or low interest rates, all of which lead to higher levels of spending in the economy. Therefore, choice A is the correct answer.

B is incorrect because a decrease in aggregate supply would lead to a different type of inflation called cost-push inflation. 
C is incorrect because input costs rising would also lead to cost-push inflation. 
D is incorrect because incorrect inflation forecasting may influence saving, consumption, and investment patterns, but does not directly cause demand-pull inflation. 
E is incorrect because unemployment being above the natural rate also leads to cost-push inflation rather than demand-pull inflation.

Demand-Pull Inflation Can Start