Economic growth will not result in inflation if aggregate demand shifts
A)outward to the right at the same speed as aggregate supply.
B)inward to the left at the same speed as aggregate supply.
C)outward to the right as aggregate supply shifts inward to the left.
D)inward to the left as aggregate supply shifts outward to the right.

Question

Quizplus · Accepted Answer

If aggregate demand and aggregate supply both shift outward at the same speed, there will be no pressure on the price level, and economic growth will not result in inflation. In other words, the increase in output and income resulting from economic growth will be matched by an equivalent increase in the supply of goods and services, keeping the price level stable. Choices B, C, and D involve one of the curves shifting faster than the other, leading to either inflation (C and D) or a decrease in output and employment (B).

Economic Growth Will Not Result in Inflation If Aggregate Demand