A higher inflation rate can lead to lower unemployment if ________ mistakenly expect the inflation rate to be lower than it turns out to be.

Question

Quizplus · Accepted Answer

Both workers and employers may mistakenly expect the inflation rate to be lower than it turns out to be, leading to lower unemployment. This is because when inflation is higher than anticipated, workers may be willing to accept lower real wages, which make them more attractive to employers. In turn, employers may hire more workers to take advantage of the lower real wages, leading to a decrease in the unemployment rate.

A Higher Inflation Rate Can Lead to Lower Unemployment If