Assume That Expected Inflation Is Based on U E =

question 59

Multiple Choice

Assume that expected inflation is based on u e = 8nt- 1. An increase in 8 will cause:

• A) an increase in the natural rate of unemployment.
• B) inflation in period t to be more responsive to changes in unemployment in period t.
• C) a decrease in the natural rate of unemployment.
• D) inflation in period t to be less responsive to changes in unemployment in period t.
• E) no change in the natural rate of unemployment.

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