From an initial long-run equilibrium, if aggregate demand grows faster than long-run and short-run aggregate supply, then the federal government would most likely

Question

Quizplus · Accepted Answer

When aggregate demand grows faster than both long-run and short-run aggregate supply, it can lead to inflation. To counteract this, the federal government might decrease government spending to reduce the aggregate demand, thereby helping to control inflation.

From an Initial Long-Run Equilibrium, If Aggregate Demand Grows Faster