The rule of thumb used to measure the cost of reducing inflation suggests that if the actual unemployment rate exceeds the natural rate of unemployment by 1 percentage point for one year, the inflation rate:
A. falls by 1 percentage point per year.
B. rises by 1 percentage point per year.
C. falls by 0.5 percentage point per year.
D. falls by 1.5 percentage points per year.
Answer:C
The rule of thumb used to measure the cost of reducing inflation suggests that if the actual unemployment rate exceeds the natural rate of unemployment by 1 percentage point for one year, the inflation rate:
A. falls by 1 percentage point per year. B. rises by 1 percentage point per year. C. falls by 0.5 percentage point per year. D. falls by 1.5 percentage points per year.