If workers expect the rate of inflation to rise from 4% to 6% next year, this should:
A)shift the short-run aggregate supply curve to the right.
B)shift the short-run aggregate supply curve to the left.
C)move the economy up along a stationary short-run aggregate supply curve.
D)move the economy down along a stationary short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

If workers expect inflation to rise, they will anticipate higher prices for goods and services, causing them to demand higher wages. This will increase the cost of production for firms and shift the short-run aggregate supply curve to the left.

If Workers Expect the Rate of Inflation to Rise from 4