An economy experiences a rapid macroeconomic expansion, leading to a significant increase in employment and rising inflationary pressures. If robust automatic stabilisers are functioning effectively in this economy, which of the following is the most likely outcome?
The government budget deficit will automatically widen
Aggregate demand will rise by more than it otherwise would have done
Aggregate demand will rise by less than it otherwise would have done
Short-run aggregate supply will automatically shift to the left to eliminate the inflationary gap
