The expectations-augmented Phillips curve implies that lower inflation is associated with
A)a higher natural rate of unemployment.
B)a lower cyclical unemployment rate.
C)higher inflation expectations.
D)a lower natural rate of unemployment.

Question

Quizplus · Accepted Answer

The expectations-augmented Phillips curve implies that lower inflation is associated with a lower natural rate of unemployment. This is because lower inflation reduces the uncertainty surrounding future inflation, which makes it easier for firms to plan their investment and hiring decisions. As a result, firms are more likely to hire workers and invest in new capital, which leads to a lower natural rate of unemployment.

The Expectations-Augmented Phillips Curve Implies That Lower Inflation Is Associated