Figure 28-2
-Refer to Figure 28-2. Suppose the economy is at point A. The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A. Which of the following will occur?

Question

Figure 28-2 
-Refer to Figure 28-2. Suppose the economy is at point A. The Fed uses expansionary monetary policy to lower the unemployment rate permanently below the level associated with A. Which of the following will occur?

Quizplus · Accepted Answer

In the long run, attempting to keep unemployment below its natural rate using expansionary monetary policy will lead to accelerating inflation, as predicted by the Phillips Curve.

Figure 28-2 -Refer to Figure 28-2. Suppose the Economy Is at Point