According to Friedman and Phelps, if the actual inflation rate exceeds expectations of inflation, then:
A)the actual real wage is greater than the expected real wage.
B)the unemployment rate will fall.
C)the actual real wage will equal the expected real wage.
D)firms will hire fewer workers than they had planned.

Question

Quizplus · Accepted Answer

When the actual inflation rate exceeds expectations, employers benefit from lower real wages than they anticipated, making it cheaper to employ more workers. This can lead to a temporary decrease in unemployment.

According to Friedman and Phelps, If the Actual Inflation Rate