Suppose than successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve.It must be the case that inflation is ________ the average expected inflation figured into the wage contracts in force,which allows output to ________ the natural GDP.
A)greater than,remain below
B)greater than,remain above
C)less than,remain below
D)less than,remain above
E)equal to,be maintained at

Question

Quizplus · Accepted Answer

If successive AD/SAS equilibrium points run up a vertical line to the right of the LAS curve, it indicates that actual inflation is greater than the average expected inflation figured into the wage contracts. This situation allows firms to hire more labor at what appears to be lower real wages, leading to an increase in output above the natural GDP.

Suppose Than Successive AD/SAS Equilibrium Points Run Up a Vertical