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

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 inflation and unemployment have an inverse relationship.

In the Short Run, an Unexpected Increase in the Inflation