In the dynamic aggregate demand and aggregate supply model, the rate of inflation will decrease if:
A)AD shifts faster than AS.
B)AS shifts slower than AD.
C)AS shifts faster than AD.
D)the price level falls.

Question

Quizplus · Accepted Answer

If the aggregate supply (AS) curve shifts faster than the aggregate demand (AD) curve, then the price level will fall and output will increase. This means that there is a decrease in the rate of inflation. When AS shifts faster than AD, it leads to increased productivity and lower costs of production, which results in lower prices and a decrease in inflation. Therefore, option C is the correct answer.

In the Dynamic Aggregate Demand and Aggregate Supply Model, the Rate