In a case of demand-pull inflation,
A)prices rise.
B)prices stabilize.
C)prices fall.
D)unemployment rises.

Question

Quizplus · Accepted Answer

In demand-pull inflation, there is an increase in aggregate demand which leads to an increase in prices. This is because consumers are willing to pay higher prices for goods and services due to increased demand. Therefore, prices rise rather than stabilize or fall. Unemployment may not necessarily rise in demand-pull inflation, but it could lead to an increase in employment in the short run due to increased demand for goods and services.

In a Case of Demand-Pull Inflation