Suppose Expected Inflation and Actual Inflation Are Both Low, and Unemployment

question 132

Multiple Choice

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

• A)The short-run Phillips curve would shift to the left.
• B)The short-run Phillips curve would shift to the right.
• C)The economy would move up and to the left along a given short-run Phillips curve.
• D)The economy would move down and to the right along a given short-run Phillips curve.

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