Exhibit 14-8 Aggregate demand and supply

In Exhibit 14-8, when aggregate demand shifts from AD₄ to AD₅, the economy experiences:

Question

Exhibit 14-8 Aggregate demand and supply In Exhibit 14-8, when aggregate demand shifts from AD₄ to AD₅, the economy experiences:

Quizplus · Accepted Answer

When aggregate demand shifts to the right, it leads to an increase in both output and price level. This is known as demand-pull inflation, where the increase in demand leads to an increase in the price level. Cost-push inflation, on the other hand, is caused by an increase in production costs, which leads to a decrease in supply and an increase in the price level.

Exhibit 14-8 Aggregate Demand and Supply