When the Friedman-Lucas Money Surprise Model Is Incorporated into the Phillips

question 10

Multiple Choice

When the Friedman-Lucas money surprise model is incorporated into the Phillips curve,

• A) when the inflation rate is greater than the expected inflation rate, output is equal to trend output.
• B) when the inflation rate is less than the expected inflation rate, output is greater than trend output.
• C) when the inflation rate is equal to the expected inflation rate, then output is equal to trend output.
• D) when the inflation rate is rising, then output is below trend output.
• E) when the expected inflation rate rises, output falls.

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