A Difference Between the Inflation-Expectations-Augmented Phillips Curve and the Phillips

question 43

Multiple Choice

A difference between the inflation-expectations-augmented Phillips curve and the Phillips curve that is based on rational expectations is that

• A)in the latter people never make incorrect forecasts
• B)in the latter monetary policy changes cannot affect the rate of inflation
• C)in the former a change in monetary policy causes an immediate shift in the Phillips curve
• D)in the former expected inflation is always equal to actual inflation
• E)none of the above