The aggregate demand curve has a slope of -1,so that a one-percentage point reduction in inflation contributes to a one-percentage point increase in real GDP growth,other things equal.

Question

Quizplus · Accepted Answer

The statement correctly describes the slope of the aggregate demand curve. A decrease in inflation, which shifts the aggregate demand curve to the right, leads to an increase in real GDP growth, which moves along the curve. The magnitude of the effect depends on various factors, but the slope of -1 indicates a one-to-one relationship between changes in inflation and changes in real GDP, holding other factors constant.

The Aggregate Demand Curve Has a Slope of -1,so That