Use the figure below to answer the following questions.

Figure 28.2.2
-Refer to Figure 28.2.2. If the short-run aggregate supply curve does not shift, and remains at SAS₀, then the expected inflation rate is
A)zero.
B)10 percent.
C)15 percent.
D)5 percent.
E)-10 percent.

Question

Use the figure below to answer the following questions.
  
Figure 28.2.2
-Refer to Figure 28.2.2. If the short-run aggregate supply curve does not shift, and remains at SAS₀, then the expected inflation rate is
A)zero. 
B)10 percent. 
C)15 percent. 
D)5 percent. 
E)-10 percent.

Quizplus · Accepted Answer

If the short-run aggregate supply curve (SAS) does not shift, then the intersection of SAS₀ and AD will determine the equilibrium price level and output level. At this intersection point, the actual inflation rate will equal the expected inflation rate, which is determined by the vertical distance between SAS₀ and the long-run aggregate supply curve (LRAS). In this case, the vertical distance is zero, which means the expected inflation rate is also zero.

Use the Figure Below to Answer the Following Questions