Aggregate Supply Curves (1)
-Based on the graph above,if the economy is at point 2,then (assuming no price shocks and no changes in actual and potential output)the inflation rate next period will be ________ percent.
A)5
B)3.5
C)4.5
D)4
E)none of the above

Question

Aggregate Supply Curves (1) 
-Based on the graph above,if the economy is at point 2,then (assuming no price shocks and no changes in actual and potential output)the inflation rate next period will be ________ percent.
A)5 
B)3.5 
C)4.5 
D)4 
E)none of the above

Quizplus · Accepted Answer

The inflation rate is the percentage change in the price level from one period to the next. At point 2, the economy is at the natural rate of unemployment, which means that there is no inflationary or deflationary pressure. Therefore, the inflation rate next period will be 0%.