a. As given, with the expectation of upcoming inflation, demand for product will rise as people will prefer hoarding of goods before the inflation hits the market.
In the short run output remains constant, as changing output can not occur quickly and thus need long term to alter.Graphically,
With output Q constant, Price increases from P1 to P2, and actually resulting in inflation in the short run.
Part A of diagram shows when price are flexible upwards and not downwards, thus even with lower output Y' production price will stay at P .
Part B od diagram shows when price are flexible downwards and not upwards, thus with a reduction in aggregate demand, output falls to Y' and prices too falls to P'.
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