Respuesta :
Inflation is an increase in price and decrease of purchasing. If inflation is low, there will be an increase in aggregate demand.
Aggregate demand is the total of all goods and services produced during a period of time. If the prices rise, consumers tend to spend less money because the prices could keep rising and they are preparing for the future.
Aggregate demand is the total of all goods and services produced during a period of time. If the prices rise, consumers tend to spend less money because the prices could keep rising and they are preparing for the future.
A period of very low inflation would most likely lead to an increase in the aggregate demand in the economy.
Further explanation:
Implication of low inflation rate: A low inflation rate implies that the purchasing power of a specific amount of money rises. A very low inflation period will enable consumers to have a large basket of goods and services in exchange for a specific amount of money.
Effect of low inflation on the economy: A period of low inflation rate will turn into an increase in the aggregate demand in the economy. Since a low inflation rate in the economy provides benefits to the consumers in the form of increasing their purchasing power. Thus, the aggregate demand in the economy rises. People will demand number of goods and services as a result in order to take advantage of increased purchasing power.
Therefore, the measure of aggregate demand rises in the economy as a result of a period of low inflation.
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Answer details:
Grade: Senior School
Subject: Economics
Chapter: Aggregate Demand and Aggregate Supply
Keywords: a period, of low inflation, would most, likely lead to, low inflation rate, the purchasing power of a specific amount of money rises, consumers can purchase, a large basket of goods and services, the advantage of increased purchasing power, effect of low inflationary period.
