The tradeoff between inflation and unemployment does not exist in the long run because people will...
The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation:
A. exceeds the inflation rate
B. equals the inflation rate of the previous year.
C. equals the inflation rate.
D. is below the inflation rate.
Homework Answers
Answer
Option C
C. equals the inflation rate.
In the long run, the inflation is equal to expected inflation rate because the input prices are fully flexible and the long run real output is equal to full employment level of output and that is not related to price level as the unemployment level is not related to inflation.
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The tradeoff between inflation and unemployment does not exist
in the long run because people will...
Explain the tradeoff between inflation and unemployment in the short-run and the long-run.
Explain the tradeoff between inflation and unemployment in the short-run and the long-run.
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
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Consider the relationship between inflation, output, and unemployment. Think about the economy in the long run....
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Consider the short-run and long-run Phillips Curves illustrated in the figure below. Assume consumers have a...
Consider the short-run and long-run Phillips Curves illustrated in the figure below. Assume consumers have a daptive expectations. Suppose the inflation rate has been 15 percent for the past four years. The unemployment rate is currently at the natural rate of unemployment of 5 percent. The Federal Reserve decides that it wants to permanently reduce the inflation rate to 5 percent and uses monetary policy to do so. Describe the new short-run Phillips Curve with adaptive expectations. PC- PC- Inflation...
If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips...
If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, a. unemployment equals the natural rate and expected inflation equals actual inflation. b. unemployment is above the natural rate and expected inflation equals actual inflation. c. unemployment equals the natural rate and expected inflation is greater than actual inflation. d. None of the above is necessarily correct.
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1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
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