For any given growth rate of aggregate supply, a faster growth rate of aggregate demand will lead to more inflation and faster growth of real output.

Question

Quizplus · Accepted Answer

This is known as the Phillips curve, which suggests a trade-off between inflation and unemployment in the short run. A faster growth rate of aggregate demand will lead to higher inflation and increased output, while a slower growth rate of aggregate demand will lead to lower inflation and decreased output.

For Any Given Growth Rate of Aggregate Supply, a Faster