Forecasts expect inflation to be 2%. Actual inflation ends up being 1.75%. Holding all else equal, if there is no supply-side change in the economy, these statistics indicate there is:
A)currency depreciation.
B)excess demand.
C)demand-pull inflation.
D)insufficient demand.

Question

Quizplus · Accepted Answer

If actual inflation is lower than expected inflation, it indicates that there is insufficient demand in the economy. This means that consumers are not spending enough and businesses are not producing as much, leading to lower prices.

Forecasts Expect Inflation to Be 2