An article in the Economist magazine observed: Creating more inflation is harder than it sounds. . .
Question:
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.
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Step by Step Answer:
Aggregate Demand AD and ShortRun Aggregate Supply SRAS in the ADAS Model The ADAS model is a graphical representation of the aggregate economy depicting the relationship between aggregate demand AD an...View the full answer
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Related Book For 
Money Banking And The Financial System International Edition
ISBN: 978-1292000183
2nd Edition
Authors: R. Glenn Hubbard ,Anthony P Obrien
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