Inﬂation in the short run is most likely to result from a(n)
A) increase in aggregate demand or aggregate supply.
B) decrease in aggregate demand or aggregate supply.
C) increase in aggregate demand or a decrease in aggregate supply.
D) decrease in aggregate demand or an increase in aggregate supply.

Question

Quizplus · Accepted Answer

Inflation in the short run is caused by either an increase in aggregate demand or a decrease in aggregate supply. An increase in aggregate demand is caused by an increase in consumption, investment, government spending, or net exports. A decrease in aggregate supply is caused by a decrease in production or an increase in input prices. Therefore, C is the correct choice as it includes both options.

Inﬂation in the Short Run Is Most Likely to Result