CFA Practice Question

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CFA Practice Question

In cost-push inflation, aggregate demand will ______ in the long run.

A. increase
B. remain the same
C. decrease
Correct Answer: A

In the long-term, demand will increase so the real GDP will be at the full-employment level.

User Contributed Comments 3

User Comment
matjung aggregate demand will increase but the Real GDP is the same before and after cost-push inflation.
SaeedAlam How will AD increase? Through increased Consumption, Investment, Government Purchases, Net Exports? Please clarify.
bundy SaeedAlam AD will increase becasue the Fed will react to the higher unemployemnt level due to shift in SAS curve to left. They will Stimulate economy thereby shifting the AD curve to the right
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