Figure 8-5 -In Figure 8-5 Above,a Crucial Assumption That Goes into Positioning

Multiple Choice

Figure 8-5

-In Figure 8-5 above,a crucial assumption that goes into positioning the SP curve in the bottom diagram is that

A) the wage rate is 1.00.
B) expected inflation is zero.
C) expected inflation is 5 percent.
D) the AD curve is AD₁.
E) the shift of AD₁ to AD₂ will be repeated continuously.