Aggregate demand and supply analysis conclude that continuously growing ________ will cause the price level to rise continually,thus generating inflation.
A)money supply
B)government spending
C)interest rates
D)consumer expenditure

Question

Quizplus · Accepted Answer

According to the aggregate demand and supply analysis, an increase in the money supply will result in an increase in aggregate demand which leads to a rightward shift in the aggregate demand curve. This shift causes an increase in both the price level and real output. However, if the increase in the money supply continues over time, it will cause inflation as the demand for goods and services will exceed the economy's capacity to produce them. Therefore, the continuously growing money supply will cause the price level to rise continually, thus generating inflation.

Aggregate Demand and Supply Analysis Conclude That Continuously Growing ________