Assume that expected inflation is based on the following: πet = θπt-1. if θ = 0, we know that ___
- a. A reduction in the unemployment rate will have no effect on inflation.
- b. Low rates of unemployment will cause steadily increasing rates of inflation.
- c. High rates of unemployment will cause steadily declining rates of inflation.
- d. The Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate.