Suppose this year's inflation rate is 4 percent, which is greater than the 2 percent everyone expected. Which of the following is true?
A) real GDP will increase
B) the unemployment rate will probably rise
C) potential output will remain the same
D) the short-run aggregate supply curve will shift to the right
E) there will be a leftward movement along a given short-run aggregate supply curve

Question

Quizplus · Accepted Answer

Potential output is determined by factors such as technology and resources, not by inflation rates, so it remains unchanged.

Suppose This Year's Inflation Rate Is 4 Percent, Which Is