If aggregate demand grows only slightly faster than potential GDP, then the economy will
A) experience economic growth with high inflation.
B) experience recession.
C) experience economic growth with low inflation.
D) be at a business-cycle peak.

Question

Quizplus · Accepted Answer

When aggregate demand grows slightly faster than potential GDP, it indicates a healthy expansion of the economy, typically associated with low inflation. This is because the demand is increasing at a pace that does not outstrip the economy's ability to supply goods and services, thus keeping inflationary pressures low.

If Aggregate Demand Grows Only Slightly Faster Than Potential GDP