The aggregate demand curve indicates that at a given spending growth rate,a higher inflation is related to a:
A) lower real GDP growth rate.
B) higher money supply growth rate.
C) lower velocity growth rate.
D) higher unemployment rate.

Question

Quizplus · Accepted Answer

According to the aggregate demand curve, at a given spending growth rate, a higher inflation level is related to a lower real GDP growth rate. This is because higher inflation leads to an increase in prices, which reduces people's purchasing power, and ultimately decreases the demand for goods and services. As a result, businesses produce fewer goods and services, which ultimately leads to a lower GDP growth rate. Higher inflation can also lead to higher interest rates, which can further reduce spending and economic activity, and ultimately increase unemployment rates.

The Aggregate Demand Curve Indicates That at a Given Spending