Which of the following statements is incorrect?
A) The point where the short-run and long-run supply curves intersect corresponds to the potential level of output.
B) Any point on the short-run aggregate supply curve reflects current inflation equals target inflation.
C) Inflation and output are unrelated in the long run.
D) In the long run, inflation is determined by monetary policy.

Question

Quizplus · Accepted Answer

B) is incorrect because the short-run aggregate supply curve (SRAS) reflects periods where inflation can deviate from the target due to short-term shocks or fluctuations in demand. It does not imply that current inflation equals target inflation at every point on the curve.

Which of the Following Statements Is Incorrect