How does change in the expected inflation rate affect the short-run tradeoff bet

ID: 1224919 • Letter: H

Question

How does change in the expected inflation rate affect the short-run tradeoff between inflation and unemployment?

a. Immediately, because the money wage rate is sensitive to change in the expected inflation rate.

b. Immediately, because unemployment and job production respond quickly to change in the expected inflation rate.

c. Gradually, because the money wage rate responds only gradually to change in the expected inflation rate

d. Gradually, because the natural unemployment rate rarely changes.

Inflation and unemployment co-relation is inverse.

When inflation increase unemployment actually decreases, This is clearly shown in philip-curve.

B) Is the answer.

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