Suppose right now the inflation rate is 3 percent and the unemployment rate is 4 percent, but 10 months from now unemployment has dropped to 1 percent. Based on the Phillips curve, what else can you assume about the economy 10 months from now?
a. Inflation will also be 1 percent.
b. Real wages will be 1 percent higher.
c. Inflation will still be very near 3 percent.
d. Inflation will be greater than 3 percent.
d. Inflation will be greater than 3 percent.
Economics
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