Question

If expected inflation equals zero, and currently actual inflation is equal to expected inflation, the short...

If expected inflation equals zero, and currently actual inflation is equal to expected inflation, the short run Phillips Curve will most likely intersect the horizontal axis at:

Group of answer choices

a 3% unemployment rate.

a 2% unemployment rate.

a zero (0) percent unemployment rate.

the natural rate of unemployment.

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Answer #1

Answer- Correct option is 'D'

If expected inflation equals zero, and currently actual inflation is equal to expected inflation, the short run Phillips Curve will most likely intersect the horizontal axis at the natural rate of unemployment. A point where the Phillips curve intersect the horizontal axis, is the rate of unemployment consistent with stable price, called Non-accelerating inflation rate of unemployment (NAIRU), also referred to as the 'Natural rate of unemployment'.

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