If the Reserve Bank tries to lower the unemployment rate so it is lower than the natural unemployment rate,before the expected inflation rate changes,the inflation rate ________ and the unemployment rate ________.

Question

Quizplus · Accepted Answer

When the Reserve Bank lowers unemployment below the natural rate, it typically does so by increasing the money supply, which can lead to higher inflation. As a result, the inflation rate rises, and the unemployment rate falls temporarily.

If the Reserve Bank Tries to Lower the Unemployment Rate