Use the figure below to answer the following questions.

Figure 28.2.2
-Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run aggregate supply curve shifts leftward from SAS₀ to SAS₁, ceteris paribus, then the actual inflation rate
A)is greater than the expected inflation rate.
B)is less than the expected inflation rate.
C)is the same as the expected inflation rate.
D)cannot be determined without more information.
E)depends on what happens to wage settlements.

Question

Use the figure below to answer the following questions.
  
Figure 28.2.2
-Refer to Figure 28.2.2. The economy is in long-run equilibrium. If the short-run aggregate supply curve shifts leftward from SAS₀ to SAS₁, ceteris paribus, then the actual inflation rate
A)is greater than the expected inflation rate. 
B)is less than the expected inflation rate. 
C)is the same as the expected inflation rate. 
D)cannot be determined without more information. 
E)depends on what happens to wage settlements.

Quizplus · Accepted Answer

When the short-run aggregate supply curve shifts leftward, there is a decrease in output and an increase in the price level. This means that inflation will be greater than the expected inflation rate. Therefore, the actual inflation rate is less than the expected inflation rate.

Use the Figure Below to Answer the Following Questions