Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point c, where the expected and actual rates of inﬂation are each 4
Percent. If the actual rate of inﬂation unexpectedly rises from 4 percent to 6 percent, the economy
Will
A) move from a to b and eventually to c.
B) move directly from c to b.
C) remain at a.
D) move from c to d and eventually to a.

Question

Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point c, where the expected and actual rates of inﬂation are each 4
Percent. If the actual rate of inﬂation unexpectedly rises from 4 percent to 6 percent, the economy
Will
A) move from a to b and eventually to c. 
B) move directly from c to b. 
C) remain at a. 
D) move from c to d and eventually to a.

Quizplus · Accepted Answer

The Answer of  Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point c, where the expected and actual rates of inﬂation are each 4
Percent. If the actual rate of inﬂation unexpectedly rises from 4 percent to 6 percent, the economy
Will
A) move from a to b and eventually to c. 
B) move directly from c to b. 
C) remain at a. 
D) move from c to d and eventually to a.

Refer to the Diagram