The figure given below represents the short run and long run Phillips curve. Figure 14.4
Refer to Figure 14.4.If the adaptive expectations hypothesis holds, and the economy moves from point C to point D because of expansionary fiscal policy, what rate of inflation are people expecting at point D?
A) 2 percent
B) 4 percent
C) 6 percent
D) 8 percent
E) 10 percent
Correct Answer:
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