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 increases both price levels and real output due to higher demand. However, in the long run, output returns to its natural level, and only the price level remains elevated due to inflation.

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