Option A. In the short run, demand-pull inflation could best be shown as a move from b to c on AS2.
What is demand-pull inflation?
This is the upward pressure that prices are knwon to face due to the fact that there was a shprtage in the provision of goods.
This is caused when there is too much money that is being used to chase on a few goods in the economy.
Complete question
Refer to the diagram. Assume that nominal wages initially are set on the basis of the price level P2 and that the economy initially is operating at its full-employment level of output Qf. In the short run, demand-pull inflation could best be shown as
Multiple Choice
a move from b to c on AS2.
a move from b to c to d.
a change of aggregate supply from AS2 to AS3.
a move from b to d.
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