In the short run, demand-pull inﬂation will drive up the price level and increase real output, but in the
long run, only the price level will rise.

Question

Quizplus · Accepted Answer

In the short run, demand-pull inflation can increase both the price level and real output due to the economy's ability to adjust output in response to increased demand. However, in the long run, the economy reaches its full employment level, and any further increases in demand only lead to higher prices, not an increase in real output.

In the Short Run, Demand-Pull Inﬂation Will Drive Up the Price