Refer to the Above Diagram

Multiple Choice

Refer to the above diagram.Assume that the natural rate of unemployment is 7.5 percent and that the economy is initially operating at point a where the expected and actual rates of inflation are each 6 percent.If the actual rate of inflation unexpectedly falls from 6 percent to 4 percent, then the unemployment rate will:

A) temporarily fall from 7.5 percent to 4 percent.
B) permanently fall from 7.5 percent to 4 percent.
C) temporarily rise from 7.5 percent to 9.5 percent.
D) permanently rise from 7.5 percent to 9.5 percent.