Assume That an Unemployed Person Expects Inflation to Be 4

question 33

Multiple Choice

Assume that an unemployed person expects inflation to be 4.5 percent.In reality, inflation turns out to be 2.9 percent.If wage expectations lag behind actual price changes:

• A)job offers below the reservation wage will decline, and the unemployment rate will rise.
• B)job offers above the reservation wage will rise, and the unemployment rate will fall.
• C)job offers above the reservation wage will decline, and the unemployment rate will rise.
• D)job offers above the reservation wage will decline, and the unemployment rate will fall.
• E)job offers below the reservation wage will increase, and the unemployment rate will fall.

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