In the short run, an unexpected increase in the inflation rate leads to
A)a decrease in aggregate demand.
B)workers thinking the money wage rate has fallen.
C)a higher unemployment rate.
D)a lower unemployment rate.

Question

Quizplus · Accepted Answer

In the short run, an unexpected increase in inflation can lead to a lower unemployment rate due to the Phillips Curve relationship, where higher inflation can temporarily reduce unemployment as firms hire more workers to meet increased demand.

In the Short Run, an Unexpected Increase in the Inflation