Consider the AD/AS Model Below with a Constant Rate of Inflation.No

question 88

Multiple Choice

Consider the AD/AS model below with a constant rate of inflation.No exogenous AD or AS shocks are occurring. FIGURE 29-1
-Refer to Figure 29-1.Suppose the constant rate of inflation is 3%.In this case,

• A)equilibrium GDP and the price level are each increasing at a constant rate of 3% per year.
• B)the AS curve is shifting upward by 3% per year and the AD curve remains stationary.
• C)the AD curve is shifting upward by 3% per year and the AS curve remains stationary.
• D)an annual shift upward of each of the AS and AD curves by 1.5% leads to a constant rate of inflation of 3%.
• E)an annual shift upward of the AS curve by 3% is matched by an annual shift upward of the AD curve by 3%.

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