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Effect of Inflation on the Short-Run Phillips Curve

Inflation rate (percent per year)	Unemployment rate (percent)
9​	5.5​
4​	7.5​

Refer to the data in the table for the short-run Phillips curve. The short-run and long-run Phillips curves intersect at an inflation rate of 9 percent per year and an unemployment rate of 5.5 percent. The Fed announces its intention to decrease inflation from 9 percent to 4 percent per year, and it succeeds. If expectations of inflation are reduced to 7 percent by the Fed's announcement, the rate of unemployment will be ________ percent in the short run.

▸ less than 5.5

▸ 5.5

▸ between 5.5 and 7.5

▸ 7.5

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