Suppose we observe an economy experiencing an economic expansion and high inflation. This means the expansion is attributed to
A) an anticipated increase in aggregate demand.
B) an increase in long-run aggregate supply.
C) an unanticipated decrease in aggregate demand.
D) an unanticipated decrease in aggregate supply.

Question

Quizplus · Accepted Answer

High inflation during an economic expansion indicates that aggregate demand is growing faster than the economy's production capacity. This suggests that the expansion is being fueled by an anticipated increase in aggregate demand.

Suppose We Observe an Economy Experiencing an Economic Expansion and High