The short-run equilibrium of inflation and real GDP
A)depends only on the rate of growth of the money supply.
B)occurs where expected inflation equals actual inflation.
C)depends only on the rate of growth of nominal GDP.
D)None of these.

Question

Quizplus · Accepted Answer

The short-run equilibrium of inflation and real GDP is affected by multiple factors such as changes in aggregate demand, aggregate supply, and price levels. It is not solely determined by the rate of growth of the money supply or nominal GDP. The expected inflation and actual inflation may not necessarily be equal at the short-run equilibrium, as there could be unexpected changes in the economy that affect the inflation rate. Therefore, none of the given choices is the best answer.

The Short-Run Equilibrium of Inflation and Real GDP