FIGURE 9 DEMAND-PULL INFLATION
Demand-pull inflation occurs when aggregate demand expands and equilibrium output (point a) exceeds full employment output (Qf). Because the LRAS curve has not shifted, the economy will in the end move into long-run equilibrium at point c. With the new aggregate demand at AD1, prices have unexpectedly risen; therefore, short-run aggregate supply shifts to SRAS2 as workers, for example, adjust their wage demands upward, leaving prices permanently higher at P2.