With demand-pull inflation in the extended AD-AS model, there is
A)a decrease in aggregate demand and a decrease in unemployment that eventually increases nominal wages.
B)an increase in aggregate demand and a decrease in unemployment that eventually decreases nominal wages.
C)an increase in aggregate demand and an increase in unemployment that eventually decreases nominal wages.
D)an increase in aggregate demand and a decrease in unemployment that eventually increases nominal wages.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand increases, leading to higher output and lower unemployment. As the economy approaches full employment, nominal wages tend to rise due to increased demand for labor.

With Demand-Pull Inflation in the Extended AD-AS Model, There Is