Economics 15th Edition by James Gwartney,Richard Stroup,Russell Sobel,David Macpherson

Exercise 3

How would you expect the actual unemployment rate to compare with the natural unemployment rate in the following cases?
a. Prices are stable and have been stable for the last four years.
b. The current inflation rate is 3 percent, and this rate was widely anticipated more than a year ago.
c. Expansionary policies lead to an abrupt increase in the inflation rate from 3 percent to 7 percent.
d. There is an abrupt reduction in the inflation rate from 7 percent to 2 percent.