The following question are based on the following diagram:

-The rate of inflation is likely to be lowest when the economy's aggregate demand curve intersects the aggregate supply curve in
A) the horizontal range.
B) the upward-sloping range.
C) the vertical range.
D) all three ranges.
E) a manner impossible to determine from the diagram.

Question

The following question are based on the following diagram:
 
-The rate of inflation is likely to be lowest when the economy's aggregate demand curve intersects the aggregate supply curve in
A) the horizontal range. 
B) the upward-sloping range. 
C) the vertical range. 
D) all three ranges. 
E) a manner impossible to determine from the diagram.

Quizplus · Accepted Answer

The rate of inflation is lowest when the economy's aggregate demand curve intersects the aggregate supply curve in the horizontal range. This is because in the horizontal range, the price level is constant and there is no inflation.

The Following Question Are Based on the Following Diagram