Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD₁ and AS₁. Suppose that there is economic growth which shifts AS₁ to AS₂. Mainstream economists would suggest that the application of a monetary rule to keep prices constant might produce demand-pull inflation because the investment spending might: A) Increase and cause the aggregate demand curve to shift from AD₁ to AD₄ B) Decrease and cause the investment demand curve to shift from AD₁ to AD₄ C) Increase and cause the aggregate demand curve to shift from AD₁ to AD₂ D) Decrease and cause the investment demand curve to shift from AD₁ to AD₂

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The Answer of Refer to the graph above. Assume that the economy is initially in equilibrium at the intersection of AD₁ and AS₁. Suppose that there is economic growth which shifts AS₁ to AS₂. Mainstream economists would suggest that the application of a monetary rule to keep prices constant might produce demand-pull inflation because the investment spending might: A) Increase and cause the aggregate demand curve to shift from AD₁ to AD₄ B) Decrease and cause the investment demand curve to shift from AD₁ to AD₄ C) Increase and cause the aggregate demand curve to shift from AD₁ to AD₂ D) Decrease and cause the investment demand curve to shift from AD₁ to AD₂

Refer to the Graph Above