If the expected future inflation rate decreases, then
A) aggregate demand increases.
B) aggregate demand decreases.
C) short- run aggregate supply increases.
D) short- run aggregate supply decreases.

Question

Quizplus · Accepted Answer

If the expected future inflation rate decreases, individuals and firms will expect lower prices in the future, causing them to decrease their current spending. As a result, aggregate demand decreases.

If the Expected Future Inflation Rate Decreases, Then