According to the short-run Phillips curve, if unemployment is 3.2% and inflation is 1.3%, an increase in the inflation rate might result in which of the following?
A) an increase in the unemployment rate to 3.4%
B) a decrease in the unemployment rate to 3.0%
C) a decrease in the demand for labour in the economy
D) a return to the original inflation rate of 1.3%
E) permanently higher inflation and an unemployment rate of 3.2%
Correct Answer:
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