Answered: True, false or obscure. Justify your…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter27: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 8SQ

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Question

True, false or obscure. Justify your conclusion. a) It is desirable to have inflation as close to zero as possible b) High inflation means low unemployment c) The turnover rate of money decreases when nominal interest rates are high d) The probability of the unemployed finding a job is greater if more people change jobs during a given period e) Sticky wages make the Phillips curve steep

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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