How do modern economies experience ongoing inflation when achieving economic growth?
What will be an ideal response?
Over time in modern economies, both aggregate demand and long-run aggregate supply increase. A modern economy typical experiences inflation because the increase in aggregate demand is greater than the increase in long-run aggregate supply.
You might also like to view...
If there are externalities present in a market, resources are allocated efficiently when marginal social cost equals marginal social benefit
Indicate whether the statement is true or false
If an economist wants to make a prediction about the effects of a change in disposable income on the change in consumption spending based on historical data, she must assume that
a. the future will closely resemble the past. b. consumption and disposable income will be negatively related. c. the consumption function will have a downward slope. d. as disposable income increases, consumer spending will remain constant.
In a typical prisoner's dilemma with two prisoners, confessing is the dominant strategy for both prisoners
a. True b. False Indicate whether the statement is true or false
Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B