In a blog entry on the Barron’s Web site, the head of emerging markets research at the Japanese investment bank Nomura was quoted as saying the following about the Brazilian economy: “We think all this demand hitting a still inelastic aggregate supply will likely lead to a lot more inflation than growth.”

a. Relying on the definition of “inelastic” that you learned in your principles of economics course, briefly explain what this person meant by “inelastic supply.”

b. Why would an increase in aggregate demand cause more inflation than growth if aggregate supply is inelastic? Support your answer with an AD–AS graph.