There is a negative relationship between aggregate demand and inﬂation.

Question

Quizplus · Accepted Answer

When aggregate demand decreases, there is less demand for goods and services in the economy which can lead to a decrease in prices and thus a decrease in inflation. Conversely, when aggregate demand increases, there is more demand for goods and services which can lead to an increase in prices and thus an increase in inflation. Therefore, there is a negative relationship between aggregate demand and inflation.

There Is a Negative Relationship Between Aggregate Demand and Inﬂation