T Assume That Expected Inflation Is Based on N E

Multiple Choice

t Assume that expected inflation is based on n e = 8nt- 1. If 8 = 1, we know that:

A) an increase in the unemployment rate will have no effect on inflation.
B) a decrease in the unemployment rate will have no effect on inflation.
C) the actual unemployment rate will not deviate from the natural rate of unemployment.
D) low rates of unemployment will cause steadily increasing rates of inflation.
E) the Phillips curve illustrates the relationship between the level of the inflation rate and the level of the unemployment rate.