. What does Bottleneck inflation mean


A: No rise in prices despite an increase in aggregate demand

B: Rise in prices without an increase in aggregate demand

C: Decline in prices due to increase in aggregate demand

D: None of these

Best Answer

Explanation :

  • Bottleneck inflation occurs when the level of capacity utilization in an economy exceeds its normal rate. 
  • The result is a rise in prices without an increase in aggregate demand. 
  • This type of inflation is caused by shortages and bottlenecks at the productive level of the economy and has nothing to do with increases in aggregate demand stemming from consumer spending or investment.

Final answer :

  • Hence the correct option is B. Rise in prices without an increase in aggregate demand.

 

 

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