PRC-3 · Chapter 18 · Question 1 of 33
The government prints an excessive amount of money and distributes it to citizens, causing an unprecedented surge in consumer spending. Because factories are already at full capacity, they simply raise prices. This is a classic example of:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Demand-pull inflation
Explanation
Demand-pull inflation occurs when aggregate demand outpaces aggregate supply ('too much money chasing too few goods'), pulling prices upward.
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