If there is an increase in aggregate demand while aggregate supply is perfectly inelastic, then:
A) the inﬂation rate increases.
B) the equilibrium GDP decreases.
C) the quality of life in the economy improves.
D) the purchasing power of money increases.

Question

Quizplus · Accepted Answer

When aggregate demand increases while aggregate supply is perfectly inelastic, prices will rise because the quantity of goods and services available cannot increase to meet the higher demand. This leads to inflation, hence the inflation rate increases.

If There Is an Increase in Aggregate Demand While Aggregate