In the expectations-augmented Phillips curve,when the expected inflation rate is equal to the actual inflation rate,the economy will be in
A)a recession.
B)a boom.
C)full-employment.
D)a zero natural unemployment rate.

Question

Quizplus · Accepted Answer

When the expected inflation rate is equal to the actual inflation rate, the economy will be in full-employment. The expectations-augmented Phillips curve shows the relationship between unemployment and inflation, and when inflation is expected, individuals and firms adjust their behavior accordingly. At full employment, there is no cyclical unemployment, and the economy is operating at its potential.

In the Expectations-Augmented Phillips Curve,when the Expected Inflation Rate Is