The next questions refer to the following.
Suppose that, in the absence of supply shocks, the inflation-unemployment relationship is inflation rate = expected inflation rate + 2(natural rate of unemployment - actual unemployment rate).
-In the absence of stabilization policy,which of the following would most likely occur?
A) the natural rate of unemployment will rise to .07
B) the expected rate of inflation will fall to .02
C) in the long run, the inflation rate will be .04 and the unemployment rate will be .06
D) the Phillips Curve will shift outward over time
E) the inflation rate will rise to .07

Question

Quizplus · Accepted Answer

The Answer of The next questions refer to the following.
Suppose that, in the absence of supply shocks, the inflation-unemployment relationship is inflation rate = expected inflation rate + 2(natural rate of unemployment - actual unemployment rate).
-In the absence of stabilization policy,which of the following would most likely occur?
A) the natural rate of unemployment will rise to .07
B) the expected rate of inflation will fall to .02
C) in the long run, the inflation rate will be .04 and the unemployment rate will be .06
D) the Phillips Curve will shift outward over time
E) the inflation rate will rise to .07

The Next Questions Refer to the Following