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.
E)no change in real output and a labor shortage.

Question

Quizplus · Accepted Answer

In a demand-pull inflation, there is an increase in aggregate demand leading to an increase in real output. However, this increase in demand may outstrip the available supply of labor leading to a labor shortage.

A Demand-Pull Inflation Initially Is Characterized by