As people get used to inflation:
A) the short-run aggregate demand curve adjusts more rapidly.
B) wages adjust faster, and the short-run aggregate supply shifts quickly to the right.
C) wages adjust faster, and the short-run aggregate supply shifts quickly to the left.
D) the long-run aggregate demand adjusts more slowly.

Question

Quizplus · Accepted Answer

As people get used to inflation, they start expecting higher prices and demand higher wages to compensate for it. This leads to faster wage adjustments, which in turn shifts the short-run aggregate supply curve to the left. Therefore, the correct choice is C, as wages adjust faster and the short-run aggregate supply shifts quickly to the left.

As People Get Used to Inflation