In a persisting demand- pull inflation
A) aggregate demand and short- run aggregate supply both decrease.
B) short- run aggregate supply decreases and aggregate demand increases.
C) aggregate demand increases and long- run aggregate supply decreases.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

In demand-pull inflation, aggregate demand increases, leading to higher prices and output in the short run. If short-run aggregate supply decreases, it can exacerbate inflationary pressures.

In a Persisting Demand- Pull Inflation