Final answer:
Demand-pull and cost-push inflation explain how increased demand or production costs can lead to higher prices in the economy.
Explanation:
Demand-Pull Inflation: This type of inflation occurs when total demand for goods and services surpasses the economy's capacity to produce, resulting in higher prices. An example is when increased employment boosts aggregate demand, leading to price hikes due to production constraints.
Cost-Push Inflation: This inflation is caused by rising production costs, reducing supply and increasing price levels. Supply shocks, like the 1970s oil crisis, can trigger cost-push inflation by disrupting input prices and decreasing supply.
Inflation arises due to too much money chasing too few goods and results in price hikes when demand outweighs supply, causing economic imbalances.
Learn more about Inflation here:
https://brainly.com/question/51526287
