The inflationary spiral explains the causes and effects of high inflation. The spiral usually begins with an increase in demand. What is the direct effect of this increase?

When demand increases, consumers want to buy more goods and services than producers may be able to supply right away. Producers can respond by raising prices, which helps them manage the excess demand and continue making a profit. Higher wage demands and changes in the money supply may follow later in the inflationary spiral; they are not the direct first effect.

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