Question

Suppose that inflation is falling while the quantity demanded and output are rising. The economy is likely on a point on:

a. The aggregate demand curve above the short-run aggregate supply curve.

b. The aggregate demand curve below the short-run aggregate supply curve.

c. The short-run aggregate supply curve above the aggregate demand curve.

d. The short-run aggregate supply curve below the aggregate demand curve.

e. This situation is not possible.