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

Question

Quizplus · Accepted Answer

A fully anticipated increase in the inflation rate means that expectations adjust accordingly, and the economy operates on the Long-Run Phillips Curve (LRPC), where unemployment is at its natural rate, and inflation expectations are fully incorporated.

If There Is a Fully Anticipated Increase in the Inflation