The option that correctly explains the short-run Phillip's curve .

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Answer 1

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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.

Chapter 31, Problem 1MCQ

To determine

To identify:

The option that correctly explains the short-run Phillip's curve.

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Explain all options, please. The modern view of the Phillips curve suggests that a.when inflation is less than anticipated, unemployment will fall below the natural rate. b.when inflation is steady, actual unemployment will equal the natural rate of unemployment. c.systematic demand stimulus policies will be unable to affect prices in the long run. d.there will be a trade-off between inflation and unemployment in the long run.

The Phillips curve represents the relationship between unemployment and inflation. You are required to think about the impact on the economy of movements along the curve. If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.

Suppose that the government in the economy of the diagram below regards 9 percent unemployment as unacceptable. If the government insists on reducing the unemployment rate from 9 percent to 7 percent, regardless of the consequences, thena. pressure will build in the economy to continuously reduce the rate of inflation.b. the long-run Phillips curve becomes horizontal, freezing the rates of inflation and unemployment.c. the inflation rate will increase but the unemployment rate will stay at 7 percent.d. in the long run the rate of unemployment remains unchanged, but inflation will likely accelerate. Give explanations for the correct one

Answer 2

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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.

Chapter 31, Problem 1MCQ

To determine

To identify:

The option that correctly explains the short-run Phillip's curve.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

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.

Chapter 31, Problem 1MCQ

To determine

To identify:

The option that correctly explains the short-run Phillip's curve.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

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.

Chapter 31, Problem 1MCQ

To determine