Exhibit 14-4 Aggregate supply and demand curves

-The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 14-4 represents:
A) cost-push inflation.
B) demand-shock inflation.
C) wage push inflation.
D) demand-pull inflation.

Question

Exhibit 14-4 Aggregate supply and demand curves
 
-The increase in the price level as the economy moves from E₁ to E₂ in Exhibit 14-4 represents:
A) cost-push inflation. 
B) demand-shock inflation. 
C) wage push inflation. 
D) demand-pull inflation.

Quizplus · Accepted Answer

Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply, leading to an increase in the price level as the economy moves from one equilibrium to another.

Exhibit 14-4 Aggregate Supply and Demand Curves