Exhibit 7.1

-Refer to Exhibit 7.1, which shows the aggregate demand and aggregate supply curves of an economy. In the graph below, the rise in the price levels from P₁ to P₂ is a result of _____
A) cost-pull inflation.
B) cost-push inflation.
C) demand-push inflation.
D) demand-pull inflation.
E) induced inflation.

Question

Exhibit 7.1
 
-Refer to Exhibit 7.1, which shows the aggregate demand and aggregate supply curves of an economy. In the graph below, the rise in the price levels from P₁ to P₂ is a result of _____
A) cost-pull inflation. 
B) cost-push inflation. 
C) demand-push inflation. 
D) demand-pull inflation. 
E) induced inflation.

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to an increase in the price level. This is typically represented by a rightward shift in the aggregate demand curve, causing the price level to rise from P₁ to P₂.

Exhibit 7.1 -Refer to Exhibit 7.1, Which Shows the Aggregate Demand and the Aggregate