Multiple Choice
In the AD-AS model, what happens to the economy in the short run if aggregate demand increases while aggregate supply remains unchanged?
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16. Aggregate Demand and Aggregate Supply Analysis
AD-AS Model: Equilibrium in the Short Run and Long Run
Multiple Choice
What is an inflationary gap?
A
A situation in which actual real GDP (equilibrium GDP) is above potential (full-employment) GDP, producing upward pressure on prices and low unemployment.
B
A situation in which long-run aggregate supply shifts right faster than aggregate demand, causing temporary inflationary pressure.
C
A situation in which high inflation is caused solely by cost-push factors without any output gap.
D
A situation in which actual real GDP is below potential GDP, resulting in cyclical unemployment and unused capacity.
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