An unanticipated increase in the level of prices in the goods and services market, which results in a temporary reduction in real wage rates, will
A) decrease the natural rate of unemployment.
B) increase the natural rate of unemployment.
C) result in an actual rate of unemployment that is less than the natural rate of unemployment.
D) result in an actual rate of unemployment that is greater than the natural rate of unemployment.

Question

Quizplus · Accepted Answer

An unanticipated increase in prices reduces real wages temporarily, making labor cheaper and encouraging firms to hire more workers, thus reducing unemployment below the natural rate.

An Unanticipated Increase in the Level of Prices in the Goods