At full employment, the expected inflation rate is ________.
A) equal to the inflation rate
B) higher than the inflation rate
C) lower than the inflation rate
D) unrelated to the inflation rate
E) unknown

Question

Quizplus · Accepted Answer

At full employment, the economy is producing at its potential output, which means that the aggregate demand is equal to the potential output. Thus, prices should be relatively stable, meaning that the expected inflation rate is equal to the actual inflation rate.

At Full Employment, the Expected Inflation Rate Is ________