Initially, demand-pull inflation will
A) increase both the price level and increase real GDP.
B) increase the price level and decrease real GDP.
C) increase the price level and not change real GDP.
D) shift the aggregate supply curve rightward.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to an increase in the price level and an increase in real GDP initially, as producers respond to higher demand by increasing output.

Initially, Demand-Pull Inflation Will