Refer to the Above Diagram

question 66

Multiple Choice

Refer to the above diagram.Assume that the natural rate of unemployment is 7.5 percent and that the economy is initially operating at point a where the expected and actual rates of inflation are each 6 percent.If the actual rate of inflation unexpectedly falls from 6 percent to 4 percent, then the unemployment rate will:

• A)temporarily fall from 7.5 percent to 4 percent.
• B)permanently fall from 7.5 percent to 4 percent.
• C)temporarily rise from 7.5 percent to 9.5 percent.
• D)permanently rise from 7.5 percent to 9.5 percent.