Aggregate Supply Curves (1)
-Based on the graph above,suppose the economy is at point 2,then output falls to 10 and there is a price shock of one percent.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,suppose the economy is at point 2,then output falls to 10 and there is a price shock of one percent.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 calculated as the percentage change in the price level from one period to the next. In this case, the price level has increased by 1% from point 2 to point 1. Therefore, the inflation rate next period will be 1%.