-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD?, the inflation rate is ________.
A) 0 percent a year
B) 10 percent a year
C) 20 percent a year
D) More than 20 percent a year

Question

-An economy is at potential GDP and the price level is 100 in the figure above. If aggregate demand unexpectedly increases so that the aggregate demand curve shifts to AD?, the inflation rate is ________.
A) 0 percent a year 
B) 10 percent a year 
C) 20 percent a year 
D) More than 20 percent a year

Quizplus · Accepted Answer

The inflation rate is 10 percent a year because the price level increases from 100 to 110, and the time period is one year.

-An Economy Is at Potential GDP and the Price Level