Inflation can be caused:
A)only by increases in aggregate demand.
B)only by increases in aggregate supply.
C)only by decreases in aggregate supply.
D)by increases in aggregate supply or decreases in aggregate demand.
E)by increases in aggregate demand or decreases in aggregate supply.

Question

Quizplus · Accepted Answer

Inflation can be caused by either increases in aggregate demand or decreases in aggregate supply. When demand for goods and services increases faster than the supply, prices tend to rise. Similarly, when the supply of goods and services decreases, prices rise due to scarcity. Therefore, both factors can cause inflation.

Inflation Can Be Caused