If Demand-Pull Inflation Occurs When the Economy Is Already at Potential

question 10

Multiple Choice

If demand-pull inflation occurs when the economy is already at potential GDP then, following the initial increase in aggregate demand, the

• A) potential GDP line shifts leftward.
• B) AS curve shifts leftward.
• C) AS curve shifts rightward.
• D) potential GDP line shifts rightward.
• E) None of the above is correct because demand-pull inflation shifts only the aggregate demand curve.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, which can be applied to income, property, sales, and other taxes.

Cash Expenses

Outflows of cash during a particular period for operational activities, excluding non-cash expenses like depreciation.

CCA Class

CCA Class, or Capital Cost Allowance Class, involves categorizing depreciable assets into classes for tax purposes in Canada, affecting the rate at which assets can be depreciated.