Increases in unanticipated inflation will impact employment levels and would therefore tend to cause
A) unemployment to rise above the natural rate.
B) the natural rate of unemployment to rise.
C) unemployment to fall below the natural rate.
D) the natural rate of unemployment to fall.

Question

Quizplus · Accepted Answer

Increases in unanticipated inflation can lead to lower real wages as employers and workers have not adjusted their expectations. This can temporarily boost hiring, causing unemployment to fall below the natural rate until expectations adjust.

Increases in Unanticipated Inflation Will Impact Employment Levels and Would