What situation arises from an excess of demand pushing prices higher in an economy?

When there is an excess of demand in an economy, it means that consumers are willing to purchase more goods and services than are currently available at existing prices. This imbalance between demand and supply leads to upward pressure on prices, which is a key characteristic of inflationary pressures.

As demand continues to outstrip supply, sellers often respond by raising prices to capitalize on the high demand, resulting in a general increase in the price level across various goods and services in the economy. This phenomenon is indicative of inflation, which is defined as a sustained increase in the general price level.

In contrast, a saturated market implies that supply has met demand completely, leading to stable prices rather than rising ones. Achieving equilibrium would mean that supply and demand are balanced, halting any upward price movements. A fiscal deficit pertains to the financial state of a government, typically reflecting its expenditures exceeding its revenues and is unrelated to the concepts of demand and pricing pressures in this context.