this case 2 Suppose a country with a history of high inflati

this case? 2. Suppose a country with a history of high inflation is admitted to the European Union, under the condition that it must bring its inflation down to levels consistent with those typically observed in member countries. Suppose the country agrees; characterize the impact of this change on its AD curve

Solution

A reduction in inflation will lead to an increase in the demand for goods, which means that at a given price level the quantity demanded would increase and thus the aggregate demand curve will shift to the right,