In the Nineteenth Century, Some Countries Were on Gold Standards

Multiple Choice

In the nineteenth century, some countries were on gold standards so that on average the money supply growth rate was close to zero and expected inflation was more or less constant. For these countries during this time period, we find that increases in inflation were generally associated with falling unemployment. Are these findings consistent with Friedman and Phelps's theories, and why?

A) Yes, because they argued that when inflation was higher than expected, unemployment would fall.
B) Yes, because they argued that when prices rose unemployment would fall, whether actual inflation was higher than expected or not.
C) No, because they argued that higher inflation would increase unemployment.
D) No, because they argued that inflation and unemployment were unrelated.