We can explain continued increases in both output and the price level by supposing that only aggregate demand shifted right over time.

Question

Quizplus · Accepted Answer

While a rightward shift in aggregate demand can explain an increase in both output and the price level in the short run, over time, increases in the price level with continued output growth would likely also require shifts in aggregate supply to sustain the growth without leading to excessive inflation.

We Can Explain Continued Increases in Both Output and the Price