Assume That a Low-Wage Contract Is in Force in the Society

question 49

Multiple Choice

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy.Which of the following will be observed?

• A)The actual inflation rate will match the low rate that people had expected.
• B)The actual inflation rate will be higher than the natural rate.
• C)The actual inflation rate will be higher than the low rate that people had expected.
• D)The actual inflation rate will be lower than the high rate that people had expected.
• E)The unemployment rate will be lower than the natural rate.

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