During demand-pull inflation, the economy cannot expand beyond full employment.

Question

Quizplus · Accepted Answer

During demand-pull inflation, there is an increase in demand for goods and services, leading to an increase in prices. This can lead to an expansion of the economy beyond full employment if there is an increase in the production of goods and services to meet the demand. However, if the economy is already at full employment, there may not be additional resources available to increase production, which can result in inflationary pressures.

During Demand-Pull Inflation, the Economy Cannot Expand Beyond Full Employment