Along the SP curve with expected inflation of 6 percent,we are above the natural GDP when
A)inflation falls below 6 percent.
B)inflation rises above 6 percent.
C)expected inflation falls below 6 percent.
D)expected inflation rises above 6 percent.

Question

Quizplus · Accepted Answer

Along the SP curve, we are above the natural GDP when the actual inflation exceeds the expected inflation. So, if the expected inflation is 6 percent, we will be above the natural GDP only when the actual inflation rises above 6 percent (option B).

Along the SP Curve with Expected Inflation of 6 Percent,we