In the short run, if the actual rate of inflation falls lower than the expected rate, then
A)profits will temporarily fall and unemployment will temporarily rise.
B)profits will temporarily rise and unemployment will temporarily fall.
C)nominal wages will rise, profits will rise, and unemployment will fall.
D)nominal wages will fall, profits will fall, and unemployment will rise.

Question

Quizplus · Accepted Answer

When the actual rate of inflation is lower than expected, firms face higher real wages than anticipated, leading to reduced profits and potentially higher unemployment.

In the Short Run, If the Actual Rate of Inflation