Which of the following is an assumption of the dynamic aggregate demand - aggregate supply model?
A)Aggregate demand and short-run aggregate supply shift to the right in most years.
B)Potential GDP is constant.
C)Actual GDP is determined by the intersection of aggregate demand and long-run aggregate supply.
D)The short-run aggregate supply shifts continuously to the left.
E)Potential GDP is a function of the price level.

Question

Quizplus · Accepted Answer

The dynamic aggregate demand and aggregate supply model assumes that aggregate demand and short-run aggregate supply typically increase over time, reflecting economic growth and inflation. This is why they are often depicted as shifting to the right in most years.

Which of the Following Is an Assumption of the Dynamic