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D Question 14 2.6 pts According to our Aggregate Supply / Demand analysis, if we started in full-employment equilibriumm and then had an increase in aggregate demand, ceteris paribus, would cause which of the following (in the short run)? Deflation and recession Inflation and recession Deflation and economic growth Inflation and economic growth Neither deflation nor inflation

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according to aggregate demand aggregate supply model, if we started in full employment equilibrium situation and then aggregate demand increases then in the short run there will be inflation and economic growth. the economy might experience an an above full employment equilibrium situation because when there is full employment and aggregate demand increases for some reasons price level increases and the economy experiences inflation in the short run and to tackle the inflationary gap sometimes the economy over utilises its capacity which results in economic growth.

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