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Two possible triggers for inflationary pressure appear in the AD/AS model. What are they?
AA fall in government spending, and a rise in the jobless rate
BAD near potential GDP shifting right, or rising costs pushing AS left
CA rise in productivity, and a fall in interest rates across the board
DA leftward shift of AD, paired with a rightward shift of AS instead
Answer & Solution
Correct answer: B. AD near potential GDP shifting right, or rising costs pushing AS left
1. The first trigger is a demand-side story: AD keeps shifting right after the economy is already near potential GDP, pushing the equilibrium into the steep part of the AS curve.
2. Once inputs are fully employed, that extra demand can only raise the price level, not output.
3. The second trigger is a supply-side story: a rise in an input price like oil or labor shifts AS to the left, which also raises the price level.
4. Option D describes shifts that would lower, not raise, the price level, so it names the wrong directions entirely.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.5 | How the AD/AS Model Incorporates Growth, Unemployment, and Inflation_
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