From an initial equilibrium in the AD-AS model,an increase in consumption growth will initially cause inflation:
A) and real growth to increase.
B) to increase and real growth to decrease.
C) to increase and real growth to remain unchanged.
D) and real growth to remain unchanged.

Question

Quizplus · Accepted Answer

An increase in consumption growth leads to higher aggregate demand. This, in turn, causes both inflation and real growth to increase as the economy moves along the short-run aggregate supply curve to a higher price level and output.

From an Initial Equilibrium in the AD-AS Model,an Increase in Consumption