Suppose that the inflation rate has been 3 percent per year for several years, and the unemployment rate has been stable at 5 percent. Unanticipated changes in government policy cause the inflation rate to increase to 6 percent. In the short run, we would expect the unemployment rate to

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Quizplus · Accepted Answer

In the short run, according to the Phillips Curve, there is typically an inverse relationship between inflation and unemployment. An increase in inflation often leads to a decrease in unemployment.

Suppose That the Inflation Rate Has Been 3 Percent Per