Economics • Economic BasicsMedium
Analyze the mechanics of demand-pull inflation in an economy. Which of the following primary triggers initiates this specific type of price rise?
A. A sudden sharp increase in international crude oil prices
B. Excessive aggregate demand outpacing aggregate supply capacity✓ Correct Answer
C. Widespread trade union demands for higher nominal wages
D. Bottlenecks in agricultural supply chains due to monsoon failures
💡 Solution & Explanation
Demand-pull inflation occurs when aggregate demand for goods and services in an economy outpaces aggregate supply, creating an upward pressure on price levels according to Keynesian macroeconomic principles. Cost-push inflation arises from independent supply shocks like rising oil costs or increased wage demands. The consumer price index is the primary statistical measure used to track overall retail price movements.
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