In an economy in which aggregate demand is stable and a period of sustained and significant productivity growth occurs, there will be
A) secular deflation.
B) secular inflation.
C) a constant price level.
D) a shift of aggregate supply to the left.

Question

Quizplus · Accepted Answer

Secular deflation is likely to occur in an economy experiencing sustained and significant productivity growth with stable aggregate demand. This is because productivity improvements mean more goods and services can be produced at a lower cost, leading to lower prices if demand does not increase proportionately.

In an Economy in Which Aggregate Demand Is Stable and a Period