Assume that last year's inflation rate is the same as the expectation of inflation for the next year. According to the expectations Phillips curve, if the inflation rate remains constant relative to the expected rate, the unemployment rate
A) decreases.
B) increases.
C) may increase or decrease.
D) does not change.

Question

Quizplus · Accepted Answer

According to the expectations Phillips curve, if the inflation rate remains constant relative to the expected rate, the unemployment rate does not change.

Assume That Last Year's Inflation Rate Is the Same as the Expectation