In the dynamic aggregated demand and aggregate supply model,if AD shifts further than AS
A)inflation occurs.
B)deflation occurs.
C)stagflation occurs.
D)disinflation occurs.

Question

Quizplus · Accepted Answer

If AD shifts further than AS, there will be excess demand in the economy leading to an increase in prices, which is known as inflation. Thus, option A is the correct choice. Option B (deflation) would occur if AS shifted further than AD, while option C (stagflation) would occur if AD shifted leftward while AS shifted rightward, leading to a combination of inflation and slow economic growth. Option D (disinflation) is a gradual decrease in the rate of inflation, which is not necessarily related to the relationship between AD and AS.

In the Dynamic Aggregated Demand and Aggregate Supply Model,if AD