Workers expect inflation to rise from 3% to 5% next year.As a result,this should
A)shift the short-run aggregate supply curve to the left.
B)shift the short-run aggregate supply curve to the right.
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

An increase in expected inflation will lead to an increase in production costs as workers will demand higher wages to compensate for the higher cost of living. This will shift the short-run aggregate supply curve to the left, indicating a decrease in aggregate supply and an increase in the price level.

Workers Expect Inflation to Rise from 3% to 5% Next