Refer to the Above Diagram

question 70

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.In the long run, the decline in the actual rate of inflation from 6 percent to 4 percent will:

• A)reduce the unemployment rate.
• B)reduce corporate profits in real terms.
• C)have no effect on the unemployment rate.
• D)reduce real domestic output.

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