Inflation occurs over time as a result of
A) aggregate demand increasing faster than long- run aggregate supply.
B) long- run aggregate supply increasing faster than short- run aggregate supply.
C) long- run aggregate supply increasing faster than aggregate demand.
D) decreases in aggregate demand.

Question

Quizplus · Accepted Answer

Inflation occurs when the overall price level of goods and services increases over time. This can happen if aggregate demand (total demand for goods and services in the economy) increases faster than long-run aggregate supply (maximum level of output an economy can produce in the long run). As demand outstrips supply, firms can charge higher prices for their goods and services, leading to inflation. Therefore, choice A is the correct option.

Inflation Occurs Over Time as a Result of