Demand-side inflation occurs when
A. increases in aggregate demand are not matched by increases in aggregate supply.
B. aggregate demand falls more rapidly than aggregate supply.
C. increases in aggregate supply outstrip increases in aggregate demand.
D. long-run aggregate demand rises faster than short-run aggregate supply.
Answer: A
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Workers and firms are currently expecting the price level to increase from 110 to 114. The Federal Reserve then announces that it will be reducing the growth rate of the money supply
If the Fed's announcement is credible, and firms and workers have rational expectations, describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.
Retailers do not find it profitable to engage in promotional activities because
a. They reap the full benefits of the promotion b. They have to share the benefits of the promotion with the manufacturer c. They are unaware of competing retailers' ability to "free ride" on their efforts d. All of the above