A in the Nineteenth Century,some Countries Were on a Gold

question 111

Multiple Choice

a In the nineteenth century,some countries were on a gold standard so that on average the money supply growth rate was close to zero and expected inflation was more or less constant.For these countries during this time period,we find that increases in actual inflation were generally associated with falling unemployment.These findings

• A) are consistent with Friedman and Phelps' theories,because they argued that when inflation was higher than expected,unemployment would fall.
• B) are consistent with Friedman and Phelps' theories,because they argued that when prices rose unemployment would fall whether actual inflation was higher than expected or not.
• C) are inconsistent with Friedman and Phelps' theories,because they argued that higher inflation would increase unemployment.
• D) are inconsistent with Friedman and Phelps' theories,because they argued that inflation and unemployment are unrelated.