In the long run, demand-pull inﬂation leads to
A) higher unemployment and a higher price level.
B) lower real wages and higher unemployment.
C) lower real output and no change in unemployment.
D) a higher price level and no change in real output.

Question

Quizplus · Accepted Answer

Demand-pull inflation typically results in higher prices but does not necessarily lead to a change in real output. However, if the inflation is not controlled, it can eventually result in higher inflation expectations which can cause wages and prices to spiral out of control, leading to instability and economic stagnation. Therefore, in the long run, demand-pull inflation can lead to a higher price level but not necessarily any change in real output.

In the Long Run, Demand-Pull Inﬂation Leads to