Demand-pull inflation occurs when:
Correct answer: A. Total demand grows faster than total output
- A. Total demand grows faster than total output
- B. Production costs rise across major industries
- C. The money supply falls below its normal level
- D. Imported goods become cheaper for consumers
Explanation
Demand-pull inflation results when aggregate demand exceeds the economy's capacity to produce goods and services. Higher wages or fuel prices causing inflation would instead describe cost-push inflation.
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About Economy of Pakistan
Pakistan's economy is examined through agriculture, industry, services, trade, remittances, employment, population, poverty and regional development. The topic also covers GDP and national income, inflation, fiscal and monetary policy, taxation, public debt, the balance of payments, energy constraints and structural challenges, including the role of the State Bank and development planning.
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