An article in the Economist magazine observed: Creating more inflation is harder than it sounds. . . . It requires aggregate demand to return to,
An article in the Economist magazine observed:
“Creating more inflation is harder than it sounds. . . . It requires aggregate demand to return to, and exceed, potential output.” Use an AD-AS graph to show why aggregate demand being greater than potential GDP results in inflation. Is aggregate demand being greater than potential GDP the only way for inflation to occur in the AD-AS model? Briefly explain.
Source: “A Winding Path to Inflation,” Economist, June 3, 2010.
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Authors: R Glenn Hubbard ,Anthony Patrick O'Brien
1st Edition
013255352X, 978-0132553520
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