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Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of True or False: If people have rational expectations, the sacrifice ratio could be much higher than suggested by the short-run Phillips curve. O True O False

Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of True or False: If people have rational expectations, the sacrifice ratio could be much higher than suggested by the short-run Phillips curve. O True O False

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter35: The Short-Run Trade-off Between Inflation And Unemployment
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7. The costs of disinflation. The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. INFLATION RATE (Percent) 20 38 16 12 10 • 6 0 0 1 LRPC 2 6 345 7 UNEMPLOYMENT RATE (Percent) 0 9 SRPC 10
Transcribed Image Text:7. The costs of disinflation. The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. INFLATION RATE (Percent) 20 38 16 12 10 • 6 0 0 1 LRPC 2 6 345 7 UNEMPLOYMENT RATE (Percent) 0 9 SRPC 10
Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of True or False: If people have rational expectations, the sacrifice ratio could be much higher than suggested by the short-run Phillips curve. True False
Transcribed Image Text:Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of True or False: If people have rational expectations, the sacrifice ratio could be much higher than suggested by the short-run Phillips curve. True False
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