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 c, where the expected and actual rates of inflation are each 4
Percent. If the actual rate of inflation unexpectedly rises from 4 percent to 6 percent, the economy
Will

A) move from a to b and eventually to c.
B) move directly from c to b.
C) remain at a.
D) move from c to d and eventually to a.