How Do Changes in Inflation Expectations Impact the Short-Run Aggregate

question 3

Multiple Choice

How do changes in inflation expectations impact the short-run aggregate supply curve and the long-run aggregate supply curve?

• A) Expectations for inflation to rise will cause short-run and long-run aggregate supply to increase.
• B) Expectations for inflation to rise will cause short-run and long-run aggregate supply to decrease.
• C) Expectations that inflation will rise will cause movements along both curves but would cause neither curve to shift.
• D) Expectations that inflation will rise will cause short-run aggregate supply to decrease and long-run aggregate supply to remain constant.

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