Inflation Rate (%) PCLR -PC₂ Multiple Choice PC₁ 7 Unemployment Rate (%) Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point a where the expected and actual rates of inflation are each 6 percent. If the actual rate of inflation unexpectedly falls from 6 percent to 4 percent, then the unemployment rate will Opermanently fall from 5 percent to 4 percent permanently rise from 5 percent to 7 percent.

Inflation Rate (%) PCLR -PC₂ Multiple Choice PC₁ 7 Unemployment Rate (%) Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point a where the expected and actual rates of inflation are each 6 percent. If the actual rate of inflation unexpectedly falls from 6 percent to 4 percent, then the unemployment rate will Opermanently fall from 5 percent to 4 percent permanently rise from 5 percent to 7 percent.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 1.1P

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