Figure 10-7

-If an economy is growing, but experiences no inflation, this means

Question

Figure 10-7
​  ​
-If an economy is growing, but experiences no inflation, this means

Quizplus · Accepted Answer

An economy growing without inflation suggests that both aggregate demand and aggregate supply increased by the same amount. This is because if aggregate demand increased without aggregate supply keeping up, inflation would occur. If aggregate supply decreased without aggregate demand decreasing, prices would rise and again, inflation would occur. Therefore, if inflation is not present, it can be inferred that both supplies and demands must have increased equally.

Figure 10-7 ​ ​

Figure 10-7