Suppose the Economy Is in Long-Run Equilibrium at an Inflation

question 86

Multiple Choice

Suppose the economy is in long-run equilibrium at an inflation rate of 1% Then inflation expectations rise to 2% and inflation rises to 3%.The increase in expected inflation shifts the short-run Phillips curve

• A)right.Overall,unemployment moves above its natural rate.
• B)right.Overall,unemployment moves below its natural rate.
• C)left.Overall,unemployment moves above its natural rate.
• D)left.Overall,unemployment moves below its natural rate.

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