If most people expect the inflation rate will increase, the:
A) long-run aggregate supply curve would shift right.
B) aggregate demand curve would shift right.
C) short-run aggregate supply curve would shift to the right.
D) short-run aggregate supply curve would shift to the left.

Question

Quizplus · Accepted Answer

If most people expect the inflation rate to increase, they will adjust their behavior accordingly. For example, workers may demand higher wages, which will increase production costs for firms. As a result, the short-run aggregate supply curve would shift to the left, indicating higher price levels and lower real output.

If Most People Expect the Inflation Rate Will Increase, The