According to the expectations-augmented Phillips curve,if macroeconomic policy succeeds in reducing inflation below its expected rate,unemployment will
A)fall below the natural rate.
B)rise above the natural rate.
C)remain unchanged.
D)be equal to the natural rate.

Question

Quizplus · Accepted Answer

The expectations-augmented Phillips curve suggests that unemployment will rise above the natural rate if inflation is reduced below its expected rate. This is because workers and businesses will adjust their expectations based on past inflation trends, and if inflation is lower than expected, wages and prices will adjust downward, leading to higher unemployment.

According to the Expectations-Augmented Phillips Curve,if Macroeconomic Policy Succeeds in Reducing