The aggregate demand curve shows that for specified spending growth rates,inflation rates and real GDP growth rates are inversely related in the short run.

Question

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The aggregate demand curve is downward sloping, indicating that when spending growth rates increase, the inflation rates and real GDP growth rates are inversely related in the short run. This means that higher spending leads to higher inflation rates and lower GDP growth rates, while lower spending leads to lower inflation rates and higher GDP growth rates.

The Aggregate Demand Curve Shows That for Specified Spending Growth