Because increases in inflation reduce planned spending and short-run equilibrium output:
A)the short-run aggregate supply line is downward sloping.
B)the aggregate demand curve is horizontal.
C)the aggregate demand curve is downward sloping.
D)the aggregate demand curve is upward sloping.

Question

Quizplus · Accepted Answer

The AD curve slopes downward, showing the inverse relationship between planned spending and the inflation rate - higher inflation rates cause consumption, investment and net exports to fall.

Because Increases in Inflation Reduce Planned Spending and Short-Run Equilibrium