According to the IS-MP-PC model, a higher level of past inflation causes
A)an upward shift of the current AD curve.
B)a downward shift in the current AS curve.
C)a downward shift in the current AD curve.
D)an upward shift of the current AS curve.

Question

Quizplus · Accepted Answer

A higher level of past inflation typically leads to an upward shift in the current AS (Aggregate Supply) curve because firms and workers adjust their expectations and set higher prices and wages, anticipating continued inflation.

According to the IS-MP-PC Model, a Higher Level of Past