Demand-pull inflation results from continually increasing the quantity of money, which leads to a continually
A)decreasing potential GDP.
B)increasing potential GDP.
C)increasing aggregate supply.
D)decreasing aggregate demand.
E)increasing aggregate demand.

Question

Quizplus · Accepted Answer

Demand-pull inflation is caused by an increase in aggregate demand, which can result from an increase in the quantity of money in circulation. As the demand for goods and services increases relative to the supply, prices will rise. This means that Option E (increasing aggregate demand) is the correct answer.

Demand-Pull Inflation Results from Continually Increasing the Quantity of Money