In the AD and SRAS model, an increase in the rate of expected inflation causes

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An increase in the rate of expected inflation causes firms to anticipate higher prices for their goods and services, leading to an increase in input prices. This reduces profits and leads to a decrease in the level of output that firms are willing and able to supply at any given price level. Therefore, the short-run aggregate supply curve shifts up, indicating a decrease in aggregate output for any given price level.

In the AD and SRAS Model, an Increase in the Rate