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The Economy Shown Here Begins at a 0% Output Gap

Question 125

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The economy shown here begins at a 0% output gap. Now suppose that manufacturers in China face rising costs of rubber as an input. Based on the figure shown, if expected inflation was 2%, the actual inflation will be:
The economy shown here begins at a 0% output gap. Now suppose that manufacturers in China face rising costs of rubber as an input. Based on the figure shown, if expected inflation was 2%, the actual inflation will be: A) 3%. B) 1%. C) 0%. D) -1%.


A) 3%.
B) 1%.
C) 0%.
D) -1%.

Correct Answer:

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