Assume That the Expected Rate of Inflation Is a Function

Multiple Choice

Assume that the expected rate of inflation is a function of past inflation and that the unemployment rate has been equal to the natural rate of unemployment for some time. Given this information, we know that:

A) the rate of inflation will approximately be zero.
B) the rate of inflation should be approximately equal to the natural rate of unemployment.
C) the rate of inflation should steadily increase over time.
D) the rate of inflation should steadily decrease over time.
E) the rate of inflation should neither increase nor decrease.