-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD₁, the inflation rate is___________ A) 0 percent a year B) More than 20 percent a year C) 10 percent a year D) 20 percent a year

Question

Quizplus · Accepted Answer

If the price level increases from 100 to 110 due to the shift in aggregate demand, this represents a 10 percent increase in the price level, indicating a 10 percent inflation rate.

-An Economy Is at Potential GDP and the Price Level