What is the term for when the money supply in the economy increases, leading to higher consumer spending and demand?

The correct answer, which relates to an increase in the money supply leading to higher consumer spending and demand, is demand-pull inflation. This term describes a situation where the overall demand for goods and services in an economy exceeds the available supply, often resulting from greater consumer spending fueled by increased money supply. When consumers have more money, they are likely to spend more on goods and services, thus pushing prices up.

In this context, demand-pull inflation arises as businesses struggle to keep up with heightened demand, which can lead to price increases across the board as they attempt to match demand. This phenomenon illustrates how economic conditions such as increased money supply can influence inflation through demand-side factors.

The other terms do not accurately capture this mechanism. Cost-push inflation, for instance, is caused by rising costs of production, leading to higher prices without a corresponding increase in demand. Monetary inflation focuses more on the expansion of the money supply itself rather than its effect on spending and demand. Real inflation typically refers to changes in purchasing power relative to inflation, and does not specifically address the linkage between money supply and increasing demand in the economy.