Inflation caused by high demand and limited supply.

• A. Monetary Inflation
• B. Inflation
• C. Purchasing Power
• D. Demand-Pull Inflation

Answer: (D)

When demand outpaces what the economy can supply, buyers bid up prices for scarce goods, pulling the overall price level higher. This dynamic is exactly what demand-pull inflation describes: inflation that results from strong demand overwhelming available supply.

Monetary inflation would come from an increase in the money supply fueling spending, not from the simple mismatch of demand and supply. Inflation, as a term, is the general rise in prices but doesn’t specify the cause. Purchasing power is about what money can buy and would decline when prices rise, but it isn’t the mechanism causing inflation. So the scenario—high demand and limited supply—fits the concept of demand-pull inflation best.