A demand-pull inflation consists of ________ shifts in the AD curve and ________ shifts in the SAS curve.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Question

Quizplus · Accepted Answer

Demand-pull inflation occurs when there is an increase in demand for goods and services that exceeds the economy's ability to supply them, leading to an increase in prices. Therefore, there is a rightward shift in the aggregate demand (AD) curve. At the same time, there is pressure on firms to increase their prices to meet the increased demand, leading to a leftward shift in the short-run aggregate supply (SAS) curve. Therefore, the correct answer is option B: rightward shift in AD curve and leftward shift in SAS curve.

A Demand-Pull Inflation Consists of ________ Shifts in the AD