If Current Output Deviates from Potential Output, the Short-Run Aggregate

question 8

Multiple Choice

If current output deviates from potential output, the short-run aggregate supply curve may shift because:

• A)aggregate demand has to shift.
• B)potential output will have to shift.
• C)input costs (including wages) adjust.
• D)the economy's long-run growth rate will have to adjust.

---

Definitions:

Disinflation

A decrease in the rate of inflation, indicating a slowdown in the rate at which prices for goods and services increase over time.

Phillips Curve

An economic concept that illustrates an inverse relationship between the rate of inflation and the unemployment rate in the short run.

Disinflates

Disinflation refers to a reduction in the rate of inflation, leading to a slower increase in the price levels of goods and services.

Unemployment Rate

The percentage of the working-age population that is unemployed and in the process of looking for a job.