Inflation occurs over time as a result of
A) aggregate demand increasing faster than long-run aggregate supply.
B) decreases in aggregate demand.
C) long-run aggregate supply increasing faster than aggregate demand.
D) long-run aggregate supply increasing faster than short-run aggregate supply.

Question

Quizplus · Accepted Answer

Inflation occurs when aggregate demand increases faster than long-run aggregate supply. This can happen due to factors such as an increase in the money supply or a decrease in taxes, which can lead to increased consumer spending and therefore an increase in demand for goods and services. As supply struggles to keep up with this increased demand, prices can rise, leading to inflation.

Inflation Occurs Over Time as a Result of