In the short run, if the actual rate of inflation is lower than the expected rate, then:
A) Nominal wages will rise, profits will fall, and unemployment will rise
B) Nominal wages will fall, profits will rise, and unemployment will fall
C) Nominal wages will rise, profits will rise, and unemployment will fall
D) Nominal wages will fall, profits will fall, and unemployment will rise

Question

Quizplus · Accepted Answer

When the actual rate of inflation is lower than expected, real wages are higher than anticipated, leading to increased labor costs for firms. This results in lower profits and potentially higher unemployment as firms may reduce their workforce to cut costs.

In the Short Run, If the Actual Rate of Inflation