It seems likely that if the inflation rate falls below some threshold level,it may impair the productive capacity of the economy,and the damage is likely to get worse at lower rates of inflation.If so,the LRAS line would
A) bend upward to the right below the threshold inflation rate.
B) bend upward to the left below the threshold inflation rate.
C) not bend in either direction below the threshold inflation rate.
D) bend downward to the left below the threshold inflation rate.
E) bend downward to the right below the threshold inflation ratE.

Question

Quizplus · Accepted Answer

If the inflation rate falls below a threshold level, it can lead to deflation and a decrease in demand for goods and services. This, in turn, can discourage businesses from investing in new production capacity, as there is less demand for their products. As investment in production capacity shrinks, the LRAS line shifts to the left. Therefore, the LRAS line would bend downward to the left below the threshold inflation rate.

It Seems Likely That If the Inflation Rate Falls Below