Question

Which of the following economic changes are consistent with demand-pull inflation? Check all that apply. Falling economic output Rising economic output A sudden, sharp increase in the costs of raw materials or energy inputs

Answer 1

The correct options are 2 and 3.

Step-by-step explanation:

When there is an extreme increase in the aggregate demand, and these increases are not balanced by an equivalent or any rise in aggregate supply, demand-pull inflation would occur.

The effect of demand-pull inflation is a rise in inflation and a fall in the unemployment rate. Thus, option 2 is correct.

An excessive increase in aggregate demand for goods would also result in a sharp increase in the costs of raw materials or energy inputs, thus, option 3 is also correct.

Thus, the correct options are 2 and 3.