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- The Phillips Curveeconomics-mcqs › the-phillips-curve
- Published
- 27 May 2019
- Last updated
- 28 May 2026
What happens to unemployment when the actual inflation rate surpasses the expected inflation rate?
Multiple choice question for The Phillips Curve. Select an option, then review the explanation below.
Explanation
When actual inflation is higher than expected inflation, firms increase production, leading to a decrease in unemployment below its natural rate. Conversely, if inflation is as expected, unemployment remains at its natural level, and if inflation is lower than expected, unemployment tends to rise above the natural rate.
More The Phillips Curve MCQs
Practice related questions from the same subject.
- 1.What is the likely effect of a credible and announced monetary policy tightening if individuals form rational expectations?
- 2.Refer to Exhibit 6. If the economy is initially at long-run equilibrium at point E, which point will the economy move toward following an unanticipated monetary tightening?
- 3.Refer to Exhibit 6. If the economy is initially at long-run equilibrium at point E, what point will the economy move toward following a sudden rise in government expenditure?
- 4.Based on Exhibit 6, if individuals anticipate a 3% inflation rate and the actual inflation rate is also 3%, at which point is the economy functioning?
- 5.What is the effect of a reduction in the price of imported oil on the short-run Phillips curve?