Which of the following can be considered an indicator of an overheating economy?

Rising inflation rates due to demand-pull factors are a significant indicator of an overheating economy. An overheating economy occurs when the demand for goods and services outstrips supply, leading to upward pressure on prices. Demand-pull inflation specifically arises when consumer demand accelerates quickly, pushing prices higher as businesses struggle to meet the increased demand.

When an economy is overheating, it often experiences rapid economic growth, leading to higher employment levels, increased consumer spending, and ultimately, inflation. Policymakers may respond to this situation by raising interest rates or implementing other measures to cool down the economy and curb inflationary pressures.

In contrast, high unemployment rates, stable commodity prices, and decreasing consumer confidence typically signal economic challenges rather than an overactive economy. High unemployment indicates there may be a lack of demand for labor, stable commodity prices suggest a balance between supply and demand, and decreasing consumer confidence points to potential declines in consumer spending and economic activity.