Question

Demand-pull inflation is caused by: An increase in aggregate supply. An increase in resource costs as an economy's production capacity is approached. An increase in inventories. Excessive aggregate demand in relation to an economy's production capacity.

Answer 1

Excessive aggregate demand in relation to an economy's production capacity.

Step-by-step explanation:

• The demand and the pull is the upward movement in the prices that follows a shortage in supply. As per the economists, they describe it as the too many dollars that are followed by too few goods.

• Thus when the combined demand in the economy strongly is outweighed by the combined supply and thus the prices tend to go up. Hence the excessive increase of the demands pulls up the production capacity.