If demand grows, but there is no supply to fill it, leads to inflation.

Unlock all questions

This demo includes only 20 questions. Upgrade to access hundreds of questions, flashcards, exam simulations, and disable ads.

Full question bankExam simulationsFlashcards
From $25.99Unlock all

Prepare for the CIMA Fundamentals of Business Economics (BA1) Exam with question banks and study guides. Hone your skills with multiple choice questions and detailed explanations. Start your journey to success today!

Multiple Choice

If demand grows, but there is no supply to fill it, leads to inflation.

Explanation:
Demand-pull inflation occurs when spending in the economy grows faster than the economy can produce goods and services. If demand rises but there is no supply to fill it, shortages push prices higher across many goods and services, lifting the overall price level. That is exactly inflation—a sustained rise in the general price level—so the statement is true. Deflation would require falling prices, which this scenario does not indicate.

Demand-pull inflation occurs when spending in the economy grows faster than the economy can produce goods and services. If demand rises but there is no supply to fill it, shortages push prices higher across many goods and services, lifting the overall price level. That is exactly inflation—a sustained rise in the general price level—so the statement is true. Deflation would require falling prices, which this scenario does not indicate.

More Multiple Choice Questions
Subscribe

Get the latest from Passetra

You can unsubscribe at any time. Read our privacy policy