Suppose the actual rate of inflation in the economy is 5 percent. If we know that expected inflation is 2 percent, and that output- gap inflation is 1 percent, then we also know that
A) non- wage supply- shock inflation must equal 2 percent.
B) the NAIRU is 5 percent.
C) expected inflation is rising by 2 percent.
D) money wages must be rising by 5 percent.
E) the actual rate of inflation is falling.
Correct Answer:
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