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23 June, 03:24

Consider this statement: "Persistent inflation in a growing economy is possible only if the aggregate demand curve shifts rightward over time at a faster pace than the rightward progression of the long-run aggregate supply curve." This statement is describing

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  1. 23 June, 05:27
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    This statement is describing demand pull inflation.

    Explanation:

    If the aggregate demand increases the demand curve will shift rightwards. But if the increase in demand is higher than increase in supply this will lead to an increase in the price level. The output level will increase but constant increase in price will cause inflationary pressures. This is referred toa as demand-side inflation.
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