The signal from diode D1 then passes to tank circuit L2. THE purpose of the tank circuit,which is tuned to the carrier frequency,is clear:each time D1 conducts,the pulse of current flows through the tank.This causes the tank to resonate and the flywheel action of the tank produces a negative half cycle for each positive input pulse.
Each negative half cycle will have a same amplitude as the positive half cycle.The output is an AM wave,thus this simple circuit produces amplitude modulation.