A change in the output gap is likely to lead to ________.
A)a change in inflation
B)a change in expected inflation
C)a shift of the short-run aggregate supply curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

A change in the output gap, which is the difference between actual output and potential output, can affect the overall level of economic activity and employment, which in turn can influence prices and inflation expectations. These changes can cause a shift in the short-run aggregate supply curve, leading to changes in both inflation and expected inflation. Therefore, all of the above options are correct.

A Change in the Output Gap Is Likely to Lead