Inflationary pressure in the AS-AD model can be shown in which two cases Group of answer...

Inflationary pressure in the AS-AD model can be shown in which two cases

Group of answer choices

leftward shift of the AD curve when the economy is already producing at its potential GDP.

supply shock that shifts the AS to the left.

rightward shift of the AD curve when the economy is already producing at its potential GDP.

Expert Solution

ANSWER-

Inflationary pressure in the AS-AD model can be shown as rightward shift of the AD curve when the economy is already producing at its potential GDP.

The aggregate demand may rise when economy is producing at its potential GDP and full employment and the new equilibrium price will be at a higher level in this the inflationary pressure may arise.

So, the answer is last option - rightward shift of the AD curve when the economy is already producing at its potential GDP.

Rahul Sunny answered 2 years ago

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