Workers and firms are currently expecting the price level to increase from 110 to 114.The Federal Reserve then announces that it will be reducing the growth rate of the money supply.If the Fed's announcement is credible,and firms and workers have rational expectations,describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.

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The Answer of Workers and firms are currently expecting the price level to increase from 110 to 114.The Federal Reserve then announces that it will be reducing the growth rate of the money supply.If the Fed's announcement is credible,and firms and workers have rational expectations,describe how the expectations of firms and workers will be affected and how the change in expectations will affect the unemployment rate.

Workers and Firms Are Currently Expecting the Price Level to Increase