Figure 28-7
-Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Fed's announcement, the rate of unemployment will be ________ in the short run.

Question

Figure 28-7 
-Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Fed's announcement, the rate of unemployment will be ________ in the short run.

Quizplus · Accepted Answer

If expectations of inflation are not altered, the short-run Phillips curve suggests that reducing inflation will lead to higher unemployment. Thus, the rate of unemployment will be 7.5 percent in the short run.

Figure 28-7 -Refer to Figure 28-7. Consider the Phillips Curves Depicted in Curves