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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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