In the short-run, demand-pull inflation increases
A)real wages, but in the long-run only nominal wages.
B)nominal wages, but in the long-run only real wages.
C)real output and the price level, but in the long-run only real output.
D)real output and the price level, but in the long-run only the price level.

Question

Quizplus · Accepted Answer

In the short-run, demand-pull inflation leads to an increase in both real output and the price level as firms respond to higher demand. However, in the long-run, the economy adjusts, and only the price level increases while real output returns to its potential level.

In the Short-Run, Demand-Pull Inflation Increases