Suppose the Bank of Canada announced that it has chosen to accept a temporary period of above-target inflation.Assuming that the announcement is seen as credible,this will tend to increase inflationary expectations,which will result in
A) the AD curve shifting to the right.
B) the AD curve shifting to the left.
C) the AS curve shifting to the right.
D) the AS curve shifting to the left.

Question

Quizplus · Accepted Answer

If inflationary expectations increase, firms and workers will anticipate higher prices, leading to higher wage demands and production costs, which shifts the Aggregate Supply (AS) curve to the left.

Suppose the Bank of Canada Announced That It Has Chosen