According to the theory of rational expectations,
A) the Phillips curve is upward sloping in the short run and downward sloping in the long run.
B) both in the short and long run, the Phillips curve is horizontal.
C) the sacrifice ratio could be zero because economic agents will very quickly adjust their inflation expectations if they believe policy makers will succeed in reducing inflation.
D) the sacrifice ratio is very high because rational workers will work less if their wages do not rise as quickly as they expect.
Correct Answer:
Verified
Q27: The natural rate hypothesis argues that
A) in
Q28: In moving along a short-run Phillips curve
Q28: If the central bank increases the money
Q29: When actual inflation exceeds expected inflation,
A) unemployment
Q30: An increase in expected inflation will shift
A)
Q31: According to Friedman and Phelps, the unemployment
Q33: The long-run Phillips curve is vertical at
A)
Q34: If people have rational expectations, a monetary
Q35: Which of the following would shift the
Q36: If people expect less inflation in the
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