In the short run,as output rises above potential ________.
A)inflation will fall from its current level which explains the upward-sloping nature of the Phillips curve
B)inflation will rise from its current level which explains the upward-sloping nature of the aggregate supply curve
C)unemployment will rise above the natural rate which explains the upward-sloping nature of both the Phillips curve and the AS curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

In the short run, as output rises above potential, inflation tends to rise from its current level due to increased demand and constraints on supply. This relationship is reflected in the upward-sloping nature of the short-run aggregate supply curve, as it indicates that higher levels of output (beyond the potential or natural level) are associated with higher price levels (inflation).

In the Short Run,as Output Rises Above Potential ________