Excessive aggregate demand can result in
A) a recessionary gap and a rising inflation rate.
B) too many goods chasing too little spending.
C) an expansionary gap and a rising inflation rate.
D) an expansionary gap and a rising unemployment rate.
E) a recessionary gap and a rising unemployment ratE.

Question

Quizplus · Accepted Answer

Excessive aggregate demand refers to a situation where the demand for goods and services is greater than what can be supplied by the economy. This can lead to an expansionary gap, where output exceeds the economy's potential output and can eventually lead to inflationary pressures as firms increase prices to ration the excess demand. Hence, the correct answer is an expansionary gap and a rising inflation rate.

Excessive Aggregate Demand Can Result in