Assume That a Low-Wage Contract Is in Force in the Society

Multiple Choice

Assume that a low-wage contract is in force in the society, and the central bank follows a low-money-growth policy.Which of the following will be observed?

A) The actual inflation rate will match the low rate that people had expected.
B) The actual inflation rate will be higher than the natural rate.
C) The actual inflation rate will be higher than the low rate that people had expected.
D) The actual inflation rate will be lower than the high rate that people had expected.
E) The unemployment rate will be lower than the natural rate.