• as the unemployment is very low now, there is strong pressure on wages to rise;
• while in the short run this pressure could be prevented, in the long run this pressure will result in increase in factor prices (including wage rates);
• as a consequence, producers face higher factor prices and are forced to raise product prices which increases inflation;
• higher inflation will curb total real expenditures and as a result producers reduce their production quantities;
• it means that real GDP returns to its potential level and unemployment returns to its natural rate level.

Long run developments induced by increase in AD are shown graphically below.