Aggregate demand ________ if the expected inflation rate increases because ________.
A) does not change; inflation does not affect the aggregate demand curve
B) decreases; people wait for the exchange rates to change before making purchases
C) increases; people want to make purchases now before the price of goods and services begin to increase
D) increases; people expect to experience increases in the cost of living as the inflation begins
E) decreases; people want to wait for the price of goods and services begin to decrease

Question

Quizplus · Accepted Answer

If the expected inflation rate increases, people are likely to make purchases sooner to avoid higher prices in the future, thus increasing aggregate demand.

Aggregate Demand ________ If the Expected Inflation Rate Increases Because