Aggregate demand ________ if the expected inflation rate increases because ________.
A)increases;people expect to receive cost of living raises as the inflation begins
B)decreases;people wait for the exchange rates to change before making purchases
C)does not change;inflation does not affect the aggregate demand curve
D)increases;people want to make purchases now before the price of goods and services begin to increase
E)decreases;people want to wait for the price of goods and services begin to decrease

Question

Quizplus · Accepted Answer

When the expected inflation rate increases, people want to make purchases now before the price of goods and services begin to increase. This increases the aggregate demand as more people are making purchases, leading to an increase in demand for goods and services in the economy. Thus, the correct choice is D.

Aggregate Demand ________ If the Expected Inflation Rate Increases Because