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Assume the natural rate of unemployment is 4% and expected inflation is 2%. The Federal Reserve unexpectedly decreases the money supply, which pushes inflation to

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Assume the natural rate of unemployment is 4% and expected inflation is 2%. The Federal Reserve unexpectedly decreases the money supply, which pushes inflation to 1%. If the Friedman-Phelps adaptive expectations model of the Phillips Curve holds, we would expect O a. Unemployment to fall in the short run and in the long run return to the natural rate of unemployment as inflation expectations fall O b. Unemployment to fall in the short run and in the long run return to the natural rate of unemployment as inflation expectations increase O c. Unemployment to rise in the short run and in the long run return to the natural rate of unemployment as inflation expectations fall O d. Unemployment to rise in the short run and in the long run return to the natural rate of unemployment as inflation expectations increase

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