Figure: Two SRAS Curves rate, LRAS SRAS! (we = 5%) SRAS2 (n®-396) 3% Real GDP gr

Question

Figure: Two SRAS Curves rate, LRAS SRAS! (we = 5%) SRAS2 (n®-396) 3% Real GDP growth rate 6% 9% Reference Ref 13-5 (32-5) (Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves Which of the following is TRUE of Point A? A The actual inflation rate is 3%, and the expected inflation rate is 5%. B The actual inflation rate is 5%, and the expected inflation rate is 3%. The actual inflation rate and the expected inflation rate are both 5% D The actual inflation rate and the expected inflation rate are both 3%

Explanation / Answer

Answer:- figure shows the AD-ASmodel with two SRAS curves. Which of the following is true of point A

The correct Option is:

The actual inflation rate is 5% and the expected inflation rate is 3%

Reason:- The SRAS curve shifts from 5% inflation which is real inflation to the lower inflation SRAS position at 3% inflation rate due to the expectation of decreased inflation rate

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