In the short-run, demand-pull inflation increases:
A) Real wages, but in the long run only nominal wages
B) Nominal wages, but in the long run only real wages
C) Real output and the price level, but in the long-run only real output
D) Real output and the price level, but in the long-run only the price level

Question

Quizplus · Accepted Answer

In the short-run, demand-pull inflation increases both real output and the price level. However, in the long-run, only the price level is affected as real output returns to its natural level, determined by the factors of production and technology.

In the Short-Run, Demand-Pull Inflation Increases