Initially, demand-pull inflation will
A) increase the price level and not change real GDP.
B) increase the price level and decrease real GDP.
C) shift the aggregate supply curve rightward.
D) increase both the price level and increase real GDP.
E) decrease potential GDP.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to an increase in the price level and an increase in real GDP as producers increase output to meet higher demand.

Initially, Demand-Pull Inflation Will