Demand-pull inflation happens during periods of full employment in the business cycle when demand for goods and services is growing faster than supply.

Question

Quizplus · Accepted Answer

This statement is true. Demand-pull inflation occurs when the demand for goods and services increases at a rate faster than the economy's ability to supply them. During periods of full employment, there is a limited pool of available workers and resources, so the demand for goods and services increases at a faster pace than the rate of production. This causes an increase in the general price level, leading to inflation.

Demand-Pull Inflation Happens During Periods of Full Employment in the Business