The intersection of the inflation adjustment line and the aggregate demand curve may give values of real GDP that may be above potential GDP, but never below.

Question

Quizplus · Accepted Answer

The intersection of the inflation adjustment line and the aggregate demand curve can give values of real GDP that are both above and below potential GDP, depending on the position of the aggregate demand curve relative to the potential GDP level.

The Intersection of the Inflation Adjustment Line and the Aggregate