Demand-pull inflation would take place if the level of total spending rises in the economy and the aggregate supply curve is horizontal.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to higher prices. It doesn't require the aggregate supply curve to be horizontal; it can happen under various supply curve slopes, but typically with some degree of upward slope, indicating that as demand increases, prices rise.

Demand-Pull Inflation Would Take Place If the Level of Total