If aggregate demand grows only slightly faster than potential GDP, then the economy will____________
A) experience economic growth with low inflation
B) experience economic growth with high inflation
C) experience recession
D) be at a business-cycle peak

Question

Quizplus · Accepted Answer

When aggregate demand grows slightly faster than potential GDP, it indicates that the economy is expanding but not at an unsustainable rate that leads to high inflation or recession. It implies that the economy is growing at a steady pace while maintaining price stability, which is a desirable outcome. Therefore, the best choice is A, that the economy will experience economic growth with low inflation.

If Aggregate Demand Grows Only Slightly Faster Than Potential GDP