Final answer:
In the expansion stage of the business cycle, increased aggregate demand can lead to inflation as the economy reaches full utilization of resources, causing prices to rise when additional goods cannot be produced.
Step-by-step explanation:
In the expansion stage of the business cycle, prices may be pushed upward due to increases in resource utilization and income. During this phase, the aggregate demand in the economy increases, possibly overtaking the increases in aggregate supply. This situation can result in inflationary increases in the price level, since labor and physical capital reach full employment, restricting the economy from producing additional goods. Thus, any extra increases in aggregate demand primarily cause prices to rise rather than the quantity of output.