Which of the following would lead to the most inflation?
A)Both aggregate demand and aggregate supply increase.
B)Both aggregate demand and aggregate supply decrease.
C)Aggregate demand increases and aggregate supply decreases.
D)Aggregate demand increases and aggregate supply increases.
E)Aggregate supply decreases.

Question

Quizplus · Accepted Answer

When aggregate demand increases and aggregate supply decreases, there will be a shortage of goods and services. This leads to suppliers raising their prices to maintain equilibrium in the market. This increase in prices results in inflation.

Which of the Following Would Lead to the Most Inflation