If actual inflation is less than expected inflation, actual real wages will be ________ expected real wages and unemployment will ________.

Question

Quizplus · Accepted Answer

When actual inflation is less than expected, the real wages are higher than expected because nominal wages were set based on higher expected inflation. This can lead to higher unemployment as firms may reduce hiring or lay off workers due to higher labor costs.

If Actual Inflation Is Less Than Expected Inflation, Actual Real