If the unemployment rate initially equals its natural rate, and then the inflation rate rises above its expected rate, the unemployment rate ________.
A)falls below its natural rate
B)rises above its natural rate
C)remains constant
D)equals the natural rate

Question

Quizplus · Accepted Answer

When the inflation rate rises above its expected rate, it can lead to a temporary decrease in unemployment below its natural rate due to the short-run trade-off between inflation and unemployment, as described by the Phillips Curve.

If the Unemployment Rate Initially Equals Its Natural Rate, and Then