-In the above figure, suppose that the economy is currently at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point
A)B.
B)C.
C)D.
D)E.

Question

-In the above figure, suppose that the economy is currently at point A. If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point
A)B. 
B)C. 
C)D. 
D)E.

Quizplus · Accepted Answer

If the inflation rate rises and this rise is NOT expected by the public, the economy moves to a point such as point A because the public will demand higher wages to compensate for the unexpected inflation, which will lead to a decrease in aggregate supply and an increase in the price level.

-In the Above Figure, Suppose That the Economy Is Currently