The type of inflation that emanates from excess demand overs supply is___________?
Answer Details
The type of inflation that arises when there is too much demand for goods and services compared to their supply is called "Demand-pull inflation." This occurs when consumers want to buy more goods and services than what the economy can produce, leading to an increase in the general price level.
For example, if everyone suddenly wants to buy new cars, but there aren't enough cars being produced, the car manufacturers can raise their prices since they know that there is a high demand for their product. As a result, the overall price level in the economy will increase. This is demand-pull inflation.
Demand-pull inflation is generally caused by factors such as an increase in government spending, a surge in consumer confidence, or an expansionary monetary policy. When these factors cause people to spend more money, it leads to an increase in the demand for goods and services, and prices begin to rise.