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JadeDeLair JadeDeLair
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A year ago
Effect of Inflation on the Short-Run Phillips Curve


Inflation rate
(percent per year)		Unemployment rate (percent)
12​5​
3​7​

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 12 percent per year and an unemployment rate of 5 percent. The Fed announces its intention to decrease inflation from 12 percent to 3 percent per year, and it succeeds. If the assumptions of the rational expectations school hold true and if the Fed's announcement is credible, then the rate of unemployment will be ________ percent in the short run.

▸ less than 5

▸ 5

▸ between 5 and 7

▸ 7
Textbook 
Macroeconomics

Macroeconomics


Edition: 3rd
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