An increase in expected inflation will cause the economy's long-run aggregate supply curve to:
A) shift outward.
B) shift inward.
C) become steeper.
D) remain unchanged.

Question

Quizplus · Accepted Answer

The long-run aggregate supply curve is vertical, indicating that it is not affected by changes in the price level, which includes inflation. Therefore, an increase in expected inflation does not shift or change the shape of the long-run aggregate supply curve; it remains unchanged.

An Increase in Expected Inflation Will Cause the Economy's Long-Run