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

Question

Quizplus · Accepted Answer

If the expected future inflation rate decreases, then people will expect the prices of goods and services to increase less in the future. This will make them more likely to spend money now, which will increase aggregate demand.

If the Expected Future Inflation Rate Decreases, Then