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.

---

Definitions:

Psychoanalysis

A therapeutic approach developed by Freud, focusing on unconscious processes as they are manifested in a person's behavior and emphasizes the exploration of dreams, symbolic meanings, and free association.

Systematic Desensitization

A behavioral therapy technique used to gradually reduce anxiety through controlled exposure to feared stimuli.

Cognitive Therapy

A type of psychotherapy that aims to change negative patterns of thinking or behavior to treat psychological disorders and improve mental health.

Psychoanalysis

A therapeutic approach and theory of psychological disorders that emphasizes the role of unconscious factors in determining behavior, founded by Sigmund Freud.