Inflation caused by demand exceeding supply is known as which type?

• A. Cost-push inflation
• B. Hyperinflation
• C. Demand-pull inflation
• D. Stagflation

Answer: (C)

Demand-pull inflation occurs when overall demand in the economy exceeds the ability of firms to supply goods and services at current prices. When spending rises faster than production, prices are pushed up as buyers compete for the limited goods available. The old idea of “too much money chasing too few goods” captures this dynamic. This is different from cost-push inflation, which starts with higher production costs reducing supply and pushing prices up; hyperinflation, which is an extreme, out-of-control rise in prices; and stagflation, which combines inflation with stagnant growth and high unemployment. The scenario described—demand outpacing supply—fits the demand-pull cause exactly.