Disinflation can be explained by the Phillips Curve analysis as resulting from a situation where the actual rate of inflation is initially less than the expected rate, causing the unemployment rate to:
A) Rise temporarily, but consequent decreases in nominal wages will eventually bring the actual and expected rates of inflation into balance
B) Rise temporarily, but consequent increases in nominal wages will eventually bring the actual and expected rates of inflation into balance
C) Fall temporarily, but consequent increases in nominal wages will eventually bring the actual and expected rates of inflation into balance
D) Fall temporarily, but consequent decreases in nominal wages will eventually bring the actual and expected rates of inflation into balance

Question

Quizplus · Accepted Answer

Disinflation occurs when inflation rates decrease. According to the Phillips Curve, if actual inflation is less than expected, unemployment may rise temporarily. Lower inflation can lead to lower nominal wage growth, eventually aligning actual and expected inflation rates.

Disinflation Can Be Explained by the Phillips Curve Analysis as Resulting