If there is persistent inflation
A) long-run aggregate supply is growing at a faster rate than aggregate demand.
B) long-run aggregate supply is growing at a slower rate than aggregate demand.
C) there is an excess of total planned expenditures.
D) long-run aggregate supply is constant.

Question

Quizplus · Accepted Answer

If there is persistent inflation, it means that the overall level of prices in the economy is continuously rising. This could happen if the growth rate of aggregate demand is higher than the growth rate of long-run aggregate supply. In other words, when the economy operates beyond its potential output level due to excessive demand, there will be inflationary pressure. Therefore, in this scenario, long-run aggregate supply is growing at a slower rate than aggregate demand.

If There Is Persistent Inflation