If there is a fully anticipated increase in the inflation rate,
A)unemployment will be below the natural rate.
B)unemployment will be above the natural rate.
C)the natural unemployment rate will increase.
D)the economy is not operating on the LRPC curve.
E)the economy is operating on the LRPC curve.

Question

Quizplus · Accepted Answer

A fully anticipated increase in the inflation rate means that expectations have adjusted, so the economy continues to operate on the Long-Run Phillips Curve (LRPC), where unemployment is at its natural rate.

If There Is a Fully Anticipated Increase in the Inflation