Aggregate Demand in India Increased in 2008

question 395

Multiple Choice

Aggregate demand in India increased in 2008. In addition, real GDP grew strongly and inflation approached 10 percent. The best explanation for this inflation is that

• A) aggregate supply did not change.
• B) potential GDP decreased.
• C) there was a movement up along the aggregate demand curve in 2008.
• D) potential GDP increased, but at a slower rate than aggregate demand.