Increases in aggregate demand to the right of the fullemployment output cause inflation and positive GDP gaps
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Increases in aggregate demand to the right of the fullemployment output cause inflation and positive GDP gaps (actual GDP exceeds potential GDP). An upsloping aggregate supply curve weakens the multiplier effect of an increase in aggregate demand because a portion of the increase in aggregate demand is dissipated in inflation.
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Related Book For 
Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
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