Suppose Americans Become Pessimistic About the Future of the Economy

Multiple Choice

Suppose Americans become pessimistic about the future of the economy and, as a result, reduce their current consumption expenditures. Which of the following would you expect to occur as a result of this change?

A) In the short run, unemployment will increase and inflation will fall.
B) In the short run, unemployment will increase and inflation will rise.
C) In the short run, unemployment will decrease and inflation will rise.
D) In the short run, unemployment will decrease and inflation will fall.