In the long run, demand-pull inflation
A)starts out with a shift in the AS curve but no shift of the AD curve.
B)starts out with a rightward shift in the AD curve, followed by a resulting leftward shift of the short-run AS curve.
C)starts out with a leftward shift in the AD curve, followed by a resulting rightward shift of the short-run AS curve.
D)involves a shift of the AD curve only, with no shift of the AS curve.

Question

Quizplus · Accepted Answer

Demand-pull inflation begins with an increase in aggregate demand (AD), causing the AD curve to shift rightward. This increased demand can lead to higher prices, prompting a leftward shift in the short-run aggregate supply (AS) curve as firms face higher production costs.

In the Long Run, Demand-Pull Inflation