Figure 8-1

-Everywhere to the left of the long-run Phillips Curve as in Figure 8-1 above
A)actual inflation is less than expected inflation and the expected inflation rate will be reduced.
B)actual inflation is less than expected inflation and the expected inflation rate will be raised.
C)actual inflation is greater than expected inflation and the expected inflation rate will be raised.
D)actual inflation is greater than expected inflation and the expected inflation rate will be reduced.

Question

Figure 8-1
 
-Everywhere to the left of the long-run Phillips Curve as in Figure 8-1 above
A)actual inflation is less than expected inflation and the expected inflation rate will be reduced. 
B)actual inflation is less than expected inflation and the expected inflation rate will be raised. 
C)actual inflation is greater than expected inflation and the expected inflation rate will be raised. 
D)actual inflation is greater than expected inflation and the expected inflation rate will be reduced.

Quizplus · Accepted Answer

Everywhere to the left of the long-run Phillips Curve indicates that actual inflation is less than expected inflation. This leads to a reduction in the expected inflation rate as individuals come to expect lower inflation rates in the future.

Figure 8-1 -Everywhere to the Left of the Long-Run Phillips Curve as Long-Run