T Assume That Expected Inflation Is Based on N E

question 65

Multiple Choice

t Assume that expected inflation is based on n e = 8nt- 1. If 8 = 1, we know that:

• A) an increase in the unemployment rate will have no effect on inflation.
• B) a decrease in the unemployment rate will have no effect on inflation.
• C) the actual unemployment rate will not deviate from the natural rate of unemployment.
• D) low rates of unemployment will cause steadily increasing rates of inflation.
• E) the Phillips curve illustrates the relationship between the level of the inflation rate and the level of the unemployment rate.

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