In the short run, an unanticipated cut in the rate of inflation would
A)increase the unemployment rate.
B)decrease the unemployment rate.
C)unambiguously improve the misery index.
D)lower the natural rate of unemployment.

Question

Quizplus · Accepted Answer

In the short run, an unanticipated cut in the rate of inflation can lead to higher real wages, as nominal wages are often sticky. This can result in firms hiring fewer workers, thus increasing the unemployment rate.

In the Short Run, an Unanticipated Cut in the Rate