A demand-pull inflation initially is characterized by
A) increasing real output and a labor shortage.
B) increasing real output and a labor surplus.
C) decreasing real output and a labor shortage.
D) decreasing real output and a labor surplus.

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when demand for goods and services exceeds the economy's ability to produce them. This leads to an increase in real output as firms try to meet the demand, and a labor shortage as they hire more workers to increase production. Therefore, option A is the best choice.

A Demand-Pull Inflation Initially Is Characterized by