3  BIS Review 25/2000  The straight line A/B represents the gradual growth in the economy’s capacity to deliver goods and services without inflation. If demand exceeds the line A/B, then prices will have a tendency to rise. If demand falls short of that line, then prices will have a tendency to fall.
(I say “have a tendency to rise” and “have a tendency to fall” because of course there are many other things which have an influence on prices, including changes in international prices, changes in government charging policy, changes in tariff policies, and similar factors.)