Refer to the above diagram.The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.Demand-pull inflation in the short run is best shown as: A)a shift of the aggregate demand curve from AD₁ to AD₂. B)a move from d to b to a. C)a move directly from d to a. D)a shift of the aggregate supply curve from AS₁ to AS₂.

Question

Quizplus · Accepted Answer

Demand-pull inflation is caused by an increase in aggregate demand. Thus, the initial aggregate demand curve (AD₁) would shift to the right to AD₂, reflecting an increase in aggregate demand.

Refer to the Above Diagram