Inflation can be started by
A)a decrease in aggregate supply or a decrease in aggregate demand.
B)a decrease in aggregate supply or an increase in aggregate demand.
C)an increase in aggregate supply or an increase in aggregate demand.
D)an increase in aggregate supply or a decrease in aggregate demand.
E)an increase in aggregate demand or an increase in potential GDP.

Question

Quizplus · Accepted Answer

Inflation can be started by a decrease in aggregate supply or an increase in aggregate demand. When there is a decrease in aggregate supply, there is less output available to meet the demand, which leads to increased prices. Similarly, an increase in aggregate demand can also lead to increased prices as the demand outstrips the supply available. Therefore, option B is the correct answer.

Inflation Can Be Started by