91影视

Inflation is defined as the rate at which the general price level of goods and services rises, resulting in a decline in the economy's purchasing power.

The following diagram depicts the impact of future expectations of high inflation on the short run aggregate supply curve:

1st Figure

If the public expects more inflation in the near future, the short-run aggregate demand curve will shift leftwards from AS to AS1. Because rising inflation leads to higher prices, producers are currently reducing aggregate supply in the economy in order to supply products and services at higher prices. In $2017$, Federal officials were on the verge of raising interest rates in order to keep inflation under control. An increase in interest rates is far too late; it will raise inflation expectations even more, but an increase in interest rates far too soon will stymie recovery. This will stifle recovery and may push the economy into recession.