-Consider the above figure. If the aggregate demand curve rose from AD₁ to AD₃, our nation would be experiencing
A)an inflationary gap.
B)a recessionary gap.
C)unemployment.
D)falling prices.

Question

-Consider the above figure. If the aggregate demand curve rose from AD₁ to AD₃, our nation would be experiencing
A)an inflationary gap. 
B)a recessionary gap. 
C)unemployment. 
D)falling prices.

Quizplus · Accepted Answer

An increase in aggregate demand from AD₁ to AD₃ indicates that the economy is producing beyond its potential output, leading to an inflationary gap where demand exceeds supply, causing upward pressure on prices.

-Consider the Above Figure