Question

Creating more money to finance a deficit frequently results in inflation since there is more money chasing a limited amount of products (right shift of AD with a ___________ AS).A. left shiftedB. right shiftedC. stable/fixedD. none of the above

Answer 1

A. Left shifted

Step-by-step explanation:

Creating more money to finance a deficit frequently results in inflation since there is more money chasing a limited amount of products (right shift of AD with a left shifted AS.

In the event of inflation in the economy, the aggregate supply curve shifts to the left because the price of raw-materials used in production increases and relatively fewer output will result, causing a reduction in Aggregate Supply.