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Chapter 24: Q. 21 (page 655)

How can demand-pull inflation lead to cost-push inflation?

Short Answer

Expert verified

Demand-push inflation raises the prices of goods and services sold in the market and raises inflation rates.

Step by step solution

01

Step 1. Introduction

Inflation is defined as a steady increase in the prices of goods and services within an economy over time.

02

Step 2. Explanation

Demand-push inflation raises the prices of goods and services sold in the market and raises inflation rates, causing workers to demand higher pay in the hope of future increases in the prices of goods and services. Cost-pull inflation would result as a result of this.

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