Along the SP curve with expected inflation of 4 percent,we are below the natural GDP when
A)inflation falls below 4 percent.
B)inflation rises above 4 percent.
C)expected inflation falls below 4 percent.
D)expected inflation rises above 4 percent.

Question

Quizplus · Accepted Answer

When inflation falls below the expected rate of 4 percent, it indicates that the actual output is below the natural GDP, leading to lower price pressures.

Along the SP Curve with Expected Inflation of 4 Percent,we