Data for UK Year 2011 2012 real GDP $35 billion $38 billion inflation rate 5% 3%

Question

Data for UK Year 2011 2012 real GDP $35 billion $38 billion inflation rate 5% 3% Refer to Table 2. The likely source of this economic change is O A) an increase in the aggregate supply curve because real GDP increased and inflation decreased. B) a decrease in the aggregate supply curve because real GDP increased and inflation decreased. c) an increase in the aggregate demand curve because real GDP increased and inflation decreased. D) a decrease in the aggregate demand curve because real GDP increased and inflation decreased. Save

Explanation / Answer

The likely source of this economic change is

A) an increase in the aggregate supply curve because real GDP increased and inflation decreased.

This is the likely source of this economic change because GDP increased even when inflation decreased (price decreased) this is not possible unless supply curve increases.  

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