Ceteris paribus,in the short run following a decrease in the rate of growth in aggregate demand,we would expect to see an increase in the rate of unemployment and a decrease in the rate of inflation.

Question

Quizplus · Accepted Answer

In the short run, a decrease in aggregate demand leads to a decrease in output and a higher unemployment rate. This is known as the demand-pull inflation. However, as output decreases, there is less pressure on prices and inflation may decrease as well.

Ceteris Paribus,in the Short Run Following a Decrease in the Rate