Multiple Choice
Which of the following decreases aggregate demand and shifts the AD curve leftward?
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1. Introduction to Macroeconomics
Introduction to Economics
Multiple Choice
Typically, high inflation is a sign of which of the following economic conditions?
A
Decrease in money supply
B
Rapid increase in aggregate demand
C
Stable price levels
D
High unemployment
Verified step by step guidance1
Step 1: Understand the relationship between inflation and aggregate demand. Inflation typically occurs when aggregate demand in the economy increases rapidly, pushing prices up.
Step 2: Recall that a decrease in money supply usually leads to lower inflation or deflation, not high inflation, because less money is chasing goods and services.
Step 3: Recognize that stable price levels indicate low or no inflation, so this condition does not correspond to high inflation.
Step 4: Note that high unemployment is often associated with low inflation or deflation, as demand in the economy tends to be weak during such periods.
Step 5: Conclude that high inflation is most commonly a sign of a rapid increase in aggregate demand, which causes demand-pull inflation.
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