Please state which of the options is the correct answer and explain why this is. Additionally, please also explain why the other answers are incorrect.

(If the reasoning for the correct answer and incorrect answers are not adequately provided, your answer will be sent back to coursehero). Thank you.

Consider an economy described by the IS-LM-PC model. Suppose that in it the sensitivity of wages to unemployment equals 1.2, mark-ups are 0.1 and the catch-all term is 0.06. In addition, suppose that the economy's labour force is 10000 and the current level of output is 9000. Which of the statements about inflation in this economy is true? O a. Inflation is below expected inflation; O b. There is deflation; O c. Inflation is above expected inflation; O d. There is inflation acceleration