A country's government implements a series of expansionary policies over several years, successfully keeping the unemployment rate at 2%, a level considered to be well below its sustainable long-run potential. In the first year of this policy, the annual inflation rate rises from 2% to 5%. If the government is committed to maintaining the 2% unemployment rate indefinitely, what is the most probable long-term consequence for the inflation rate?

A government successfully implements policies that hold the unemployment rate below what is considered its long-run sustainable level. Arrange the following economic events in the most likely chronological sequence that would occur if this policy is maintained over several years.

Policy Dilemma and Inflation Dynamics

Analyzing Econlandia's Inflation Problem