If the Actual Inflation Rate Exceeds the Expected Inflation Rate,then

question 67

Multiple Choice

If the actual inflation rate exceeds the expected inflation rate,then:

• A)the economy is operating along the long-run Phillips curve.
• B)unemployment exceeds the natural rate.
• C)maintaining the existing unemployment rate will require increasing inflation in the long run.
• D)the actual rate will tend to fall toward the expected rate.
• E)unemployment will tend to decrease in the long run.

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Definitions:

Monetary Items

Financial assets and liabilities that carry a fixed monetary value, such as cash, receivables, and payables.

Foreign Currency

Currency used in a country other than one’s own, requiring exchange rate conversion for transactions and financial reporting.

Closing Rate

The exchange rate used to convert foreign currency transactions and balances into the reporting currency of a company at the end of an accounting period.

Historical Rate

The exchange rate at which a foreign currency transaction was converted into the reporting currency at the time of the transaction.