In Productovia, aggregate demand increases and aggregate supply decreases. Based on the shifts of these two curves, which of these is a likely outcome?
A) deflation
B) higher taxes
C) lower imports
D) inflation

Question

Quizplus · Accepted Answer

When aggregate demand increases and aggregate supply decreases, it is likely that the economy will experience inflation. This is because there is an increase in demand for goods and services, but the supply of these goods and services is decreasing, causing prices to rise.

In Productovia, Aggregate Demand Increases and Aggregate Supply Decreases