Refer to the Diagram

Multiple Choice

Refer to the diagram. Assume that the natural rate of unemployment is 5 percent and that the economy is initially operating at point a, where the expected and actual rates of inflation are each 6
Percent. In the long run, the decline in the actual rate of inflation from 6 percent to 4 percent will

A) reduce the unemployment rate.
B) reduce corporate profits in real terms.
C) have no effect on the unemployment rate.
D) reduce real domestic output.