Question

In: Economics

In the dynamic aggregate demand and aggregate supply​ model, the rate of inflation will increase​ if:...

In the dynamic aggregate demand and aggregate supply​ model, the rate of inflation will increase​ if:

Select one:

A. AD shifts to the right by more than the LRAS curve.

B. If total production increases faster than total spending.

C. SRAS and LRAS curves shifts to the right by the same magnitude.

D. AD shifts to the right by less than the LRAS curve.

Solutions

Expert Solution

Correct statement : a. AD shifts to the right by more than LRAS curve

When Increase in AD is greater than increase in aggregate supply, price tends to be higher at new equilibrium.

Rahul Sunny answered 2 years ago
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