Suppose We Know the Following Information About a Hypothetical Economy

Multiple Choice

Suppose we know the following information about a hypothetical economy: - real GDP = $550 billion
- potential GDP = $500 billion
- inflation rate = 4%
If the central bank tries to keep real GDP constant at $550 billion,the inflation rate is likely to

A) remain constant at 4%.
B) fall below 4%.
C) rise above 4%.
D) cause stagflation.
E) cause a recession.