In a demand-pull inflation, the AD curve shifts ________ and the SAS curve shifts ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Question

Quizplus · Accepted Answer

In a demand-pull inflation scenario, the aggregate demand (AD) curve shifts rightward due to increased demand, while the short-run aggregate supply (SAS) curve remains unchanged, implying no shift. However, the question's format suggests a need for a second part of the answer regarding the SAS curve, which remains a misunderstanding as demand-pull inflation primarily affects the AD curve. The correct understanding is that demand-pull inflation does not cause the SAS curve to shift; it is the increase in demand that shifts the AD curve rightward.

In a Demand-Pull Inflation, the AD Curve Shifts ________ and the SAS