If self-correction works,a policy that continually increases aggregate demand will
A)have a strong impact on GDP
B)cause permanent inflation
C)eventually cause the SRAS curve to shift to the right
D)have relatively large impact on GDP
E)will cause inflation to continually diminish

Question

Quizplus · Accepted Answer

A policy that continually increases aggregate demand will lead to permanent inflation if self-correction works, as the economy will adjust to higher demand levels by increasing prices rather than output in the long run.

If Self-Correction Works,a Policy That Continually Increases Aggregate Demand Will