The intersection of the aggregate demand curve and the short-run aggregate supply curve determines:
A) current inflation, but not current output.
B) potential output.
C) current output, but not current inflation.
D) current output and current inflation.

Question

Quizplus · Accepted Answer

The intersection of the aggregate demand and short-run aggregate supply curves can determine both current output (as it reflects the level of real GDP produced) and current inflation (as it reflects the price level). Therefore, the correct answer is D, current output and current inflation.

The Intersection of the Aggregate Demand Curve and the Short-Run