The Economy Was in Long-Run Equilibrium When Aggregate Demand Increased

question 137

Multiple Choice

The economy was in long-run equilibrium when aggregate demand increased.At this point in time,the expected inflation has started to adjust to the new higher actual inflation rate.According to the (Friedman) natural rate theory,this means the unemployment rate in the economy must currently be

• A) decreasing.
• B) increasing.
• C) higher than it was in long-run equilibrium.
• D) equal to what it was in long-run equilibrium.
• E) There is not enough information to answer the question.

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