Final answer:
The description aligns with cost-push inflation, where increased production costs reduce aggregate supply and increase prices while real GDP is below full employment.
Step-by-step explanation:
The description provided suggests that prices have risen despite real GDP being below the full-employment level, which is indicative of cost-push inflation. Cost-push inflation occurs when there is a negative supply shock that increases the cost of production and reduces aggregate supply (AS), such as an increase in energy prices or reduced government spending. This leads to higher prices and lower real GDP, consistent with the situation described.
In this situation, where real GDP is below the full-employment level and prices have risen recently, we are experiencing demand-pull inflation. Demand-pull inflation occurs when there is an increase in aggregate demand, pushing the prices higher due to excess demand for goods and services. In this case, the increase in aggregate demand leads to higher price levels and inflation, but no increase in real GDP.