Question

When Robert Shiller asked a sample of the general public what they thought caused​ inflation, the most frequent answer he received was​ "greed." Most economists would argue that inflation is caused by:_______
a. changes in aggregate supply.
b. changes in aggregate demand.
c. changes in both aggregate demand and aggregate supply.
d. ​firms' greed.

Answer 1

Answer:

c. changes in both aggregate demand and aggregate supply.

Explanation:

Aggregate demand which is also known as domestic final demand (DFD) refers to the demand of services and final goods in a specific market. On the other hand, aggregate supply refers to the supply of that service or final good to a specific market. Hence, it is the difference in the aggregate demand and aggregate supply of a product or good or service in a specific market. When the supply is lower than the demand, it automatically leads to inflation. There the option that changes in both aggregate demand and aggregate supply is correct.