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Figure: Expected Inflation and the Short-Run Phillips Curve
SRPC 0 is the Phillips curve with an expected inflation rate of zero; SRPC 2 is the Phillips curve with an expected inflation rate of 2%.
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, inflation of 2%, and an expectation of 2% future inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation will:

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Use the following to answer questions :
Figure: Expected Inflation and the Short-Run Phillips Curve
SRPC 0 is the Phillips curve with an expected inflation rate of zero; SRPC 2 is the Phillips curve with an expected inflation rate of 2%. 
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, inflation of 2%, and an expectation of 2% future inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation will:

Quizplus · Accepted Answer

When the central bank decreases the money supply, aggregate demand decreases, leading to higher unemployment and lower inflation. With an increase in unemployment from 6% to 8%, inflation will fall, potentially to zero, if the decrease in demand is significant enough.

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