Continuous inflation requires repeated ________ shifts of the SAS curve,accompanied by continuous ________ of price expectations.
A)leftward;upward adjustments
B)rightward;downward adjustments
C)inward;downward adjustments
D)None of the above,inflation is primarily a demand side phenomenon.

Question

Quizplus · Accepted Answer

Continuous inflation involves a situation where prices rise consistently. This requires a shift in the short-run aggregate supply (SAS) curve to the left, indicating that firms are willing to produce less at any given price level. As a result of this, continuous inflation is accompanied by continuous upward adjustments of price expectations, as firms expect costs to continue rising. Therefore, option A is the correct choice. Option B is incorrect because rightward shifts of the SAS curve would indicate that firms are willing to produce more at any given price level, leading to deflation rather than inflation. Option C is also incorrect because the term "inward" is not applicable in the context of inflation. Finally, option D is incorrect because while inflation can be driven by demand-side factors, it can also be caused by supply-side factors like rising costs of production.

Continuous Inflation Requires Repeated ________ Shifts of the SAS Curve,accompanied