How does demand-pull inflation differ from cost-push inflation?

a. Demand-pull inflation is driven by consumers, while cost-push inflation is driven by producers.

b. Demand-pull inflation is driven by producers, while cost-push inflation is driven by consumers.

c. Demand-pull inflation is driven by the private sector, while cost-push inflation is driven by the government.

d. Demand-pull inflation is driven by the government, while cost-push inflation is driven by the private sector.

From E2020 it was

A. Demand-pull inflation is driven by consumers, while cost-push inflation is driven by producers.

The correct answer is A.

The demand-pull inflation is the one generated by factors that affect the demand curve and, therefore, by factors that influence the willingness of consumers. If consumer demand is strong, and many individuals are buying the same product, the prices increases. The same effect can happen to the economy as a whole and is known as demand-pull inflation.

The cost-push inflation is generated by factors that affect the supply curve, hence, by factors related to the willingness of producers. Such inflation occurs when overall price levels increase due to the rise in the costs of the factors of production used to manufacture the goods and services in an economy, such as labor or raw materials.