Suppose Expected Inflation and Actual Inflation Are Both Relatively High,and

question 75

Multiple Choice

Suppose expected inflation and actual inflation are both relatively high,and unemployment is at its natural rate.If the Fed then pursues a contractionary monetary policy,which of the following results would be expected in the short run?

• A)Expected inflation would exceed actual inflation,and unemployment would exceed its natural rate.
• B)Expected inflation would exceed actual inflation,and unemployment would be below its natural rate.
• C)Actual inflation would exceed expected inflation,and unemployment would exceed its natural rate.
• D)Actual inflation would exceed expected inflation,and unemployment would be below its natural rate.

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Definitions:

Lemons

Sour-tasting citrus fruit that is often used in cooking or as a garnish, known for their high vitamin C content.

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The anticipated value for a given investment, calculating all possible outcomes under a set of probabilities.

Dipstick

A tool used for measuring the quantity of a liquid in a reservoir, commonly used for checking oil levels in engines.

Sealed-Bid

A method of auction where all bidders submit their bids in secret, with the highest bid usually winning without others knowing the bid amounts.