Which one of the following situations can lead to inflation?
- A. Rapid growth of aggregate demand outweighing supply ✓
- B. Sluggish growth of aggregate demand
- C. Reduction in the money supply
- D. Higher levels of unemployment
Correct Answer: A. Rapid growth of aggregate demand outweighing supply
Explanation
Demand-pull inflation occurs when the aggregate demand for goods and services outpaces aggregate supply, leading to a general increase in price levels.
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