Workers expect inflation to fall from 4% to 1% next year.As a result, this should
A)shift the short-run aggregate supply curve to the left.
B)shift the short-run aggregate supply curve to the right.
C)move the economy up along a stationary short-run aggregate supply curve.
D)move the economy down along a stationary short-run aggregate supply curve.
E)make the short-run aggregate supply curve steeper.

Question

Quizplus · Accepted Answer

When workers expect inflation to fall, they adjust their wage and price expectations, leading to lower nominal wages and prices. This shift in expectations results in a decrease in production costs, causing the short-run aggregate supply curve to shift to the right. Therefore, the correct answer is B.

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