To Illustrate Inflation Inertia in an Aggregate Demand-Aggregate Supply Model

question 33

Multiple Choice

To illustrate inflation inertia in an aggregate demand-aggregate supply model, the short-run aggregate supply curve shifts upward because of increases in ______, and the aggregate demand curve shifts upward because of increases in ______.

• A) the expected price level; the money supply
• B) the money supply; the expected price level
• C) output; the price level
• D) the price level; output

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Definitions:

Aggregate Demand

The comprehensive market demand for all types of goods and services within an economy, pegged at a certain price level throughout a specific time period.

Future Generations

Refers to the people who will live in the future, whose interests are considered in various aspects of planning and policy-making, especially in environmental and sustainability contexts.

Keynesian Analysis

An economic approach that emphasizes the role of aggregate demand in influencing economic output and inflation.

Monetary Policy

The process by which a central bank or monetary authority controls the supply of money in an economy, often targeting interest rates to achieve economic objectives.