According to the Aggregate Supply and Aggregate Demand Model, Inflation

question 22

Multiple Choice

According to the aggregate supply and aggregate demand model, inflation is caused when the short-run aggregate supply _____ or the aggregate demand:

• A) decreases; decreases.
• B) decreases; increases.
• C) increases; decreases.
• D) increases; increases.

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Definitions:

Time Periods

Time periods refer to specific lengths or intervals of time which are used for measuring, analyzing, or specifying durations, often within financial, managerial, or planning contexts.

Compound Interest

A method where interest is calculated not just on the initial amount invested or borrowed, but also on the interest that has been accumulated over previous periods, for either savings or loans.

Discount Rate

The rate of interest that is applied to find out the present value of cash flows predicted in the future, within the framework of discounted cash flow analysis.

Present Value

The monetary valuation presently of a future sum of money or ongoing cash flows, considering a predetermined rate of return.