This file claims compliance with the PDF/A standard and has been opened read-only to prevent modification. Enable 13. Use Exhibit 2. Which of the following statements is correct? If the economy is at point c, then people expect inflation. Inflation Rate of 5 percent and the actual inflation rate is 3 percent. At point a, the unemployment rate is above the natural rate of unemployment and the inflation rate is 7 percent. If the economy is operating at point b, then over time people will upwardly revise their expectations of inflation. A, B, and C. A decrease in expected inflation shifts the short-run Phillips curve left from SRPC2 to SRPC. It causes a movement from point b" toward the long-run Phillips curve. Proponents of rational expectations argued that an announced policy of reducing the growth rate of the money supply that is credible will result in people revising their forecasts of expected inflation to a lower rate of inflation. Inflation expectations would not adjust to return the economy to the natural rate of unemployment. If people expected a decrease in the money supply growth rate and inflation, then the decrease in the money growth would have little or no effect on output. A, B, and C.