If inflationary expectations on the part of the public increase,the trade-off between inflation and unemployment becomes worse.

Question

Quizplus · Accepted Answer

If the public expects higher inflation, they may demand higher wages, leading to an increase in production costs and subsequently raising prices. This can lead to a situation where the central bank has to raise interest rates to combat inflation, which can in turn lead to higher unemployment. Therefore, when inflationary expectations increase, the trade-off between inflation and unemployment becomes worse.

If Inflationary Expectations on the Part of the Public Increase,the