Refer to the information provided in Figure 28.8 below to answer the question(s) that follow. Figure 28.8
-Refer to Figure 28.8. Expected inflation at Point B equals

Question

Refer to the information provided in Figure 28.8 below to answer the question(s) that follow.  Figure 28.8
-Refer to Figure 28.8. Expected inflation at Point B equals

Quizplus · Accepted Answer

At Point B, the intersection of the AD and SRAS curves, the equilibrium price level is 120 and the equilibrium level of output is 4,000. The expected inflation rate is the difference between the equilibrium price level and the original price level (100), divided by the original price level and expressed as a percentage: (120-100)/100 = 20/100 = 0.20 or 20%. However, since the AD curve is shifted to the left, indicating lower demand for goods and services, it is likely that some slack in the economy will prevent prices from rising as much as they would have otherwise, so a more realistic estimate of inflation might be around 5%.

Refer to the Information Provided in Figure 28