The dynamic aggregate demand curve shows that for specified spending growth rates, inflation rates and real GDP growth rates are inversely related in the short run.

Question

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The dynamic aggregate demand curve is a graphical representation of the short-run relationship between the inflation rate and real GDP growth rate for a given spending growth rate. It slopes downward, showing that as spending growth rate remains constant, an increase in inflation rate is accompanied by a decrease in real GDP growth rate, and vice versa.

The Dynamic Aggregate Demand Curve Shows That for Specified Spending