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If the unemployment rate is below the natural rate, then
A) inflation is less than expected.As inflation expectations are revised the short-run Phillips curve will shift right.
B) inflation is less than expected.As inflation expectations are revised the short-run Phillips curve will shift left.
C) inflation is greater than expected.As inflation expectations are revised the short-run Phillips curve will shift left.
D) inflation is greater than expected.As inflation expectations are revised the short-run Phillips curve will shift right.
Natural Rate
The unemployment rate at which the economy operates when it is at full employment, reflecting the long-term levels of unemployment due to structural factors in the labor market.
Unemployment Rate
A measure representing the percentage of the labor force that is jobless and actively seeking employment.
Inflation Expectations
The rate at which people anticipate prices will increase in the future, which can influence current economic behavior and monetary policy.
- Comprehend how expectations shape the outcomes of inflation and unemployment rates.
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Learning Objectives
- Comprehend how expectations shape the outcomes of inflation and unemployment rates.
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