The nominal factors that determine inflation affect the aggregate demand curve only.
2.
As the aggregate demand curve is shifted outward, the general price level increases.
3.
Thus, examining the appropriate aggregation factors will ensure more reasonable interpretation of the aggregate demand curve.
4.
The aggregate demand curve's downward slope means that more output is demanded at lower price levels.
5.
The aggregate demand curve illustrates the relationship between two factors : the quantity of output that is demanded and the aggregate price level.
6.
The aggregate demand curve is plotted with investment spending on new physical capital and hence a lower quantity of goods being demanded in the aggregate.
7.
The levels of output and the price level are determined by the intersection of the aggregate supply curve with the downward-sloping aggregate demand curve.
8.
When some adverse changes in real factors are shifting the aggregate supply curve left at the same time that unwise monetary policies are shifting the aggregate demand curve right, the result is stagflation.
9.
Neo-Keynesian theory distinguished two distinct kinds of inflation : demand-pull ( caused by shifts of the aggregate demand curve ) and cost-push ( caused by shifts of the aggregate supply curve ).
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