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Which of the Following Best Explains Economic Theory Behind the Phillips

Question 11

Multiple Choice

Which of the following best explains economic theory behind the Phillips curve?


A) If inflation rate is lower than expected inflation rate,real money balance will increase leading to a lower interest rate and a higher aggregate demand and output.
B) If inflation rate is lower than expected inflation rate,real money balance will decrease leading to a higher interest rate and a lower aggregate demand and output.
C) If there is an unanticipated inflation rate,real wage will increase leading to a lower output and employment.
D) If there is an unanticipated inflation rate,real wage will decrease leading to a lower output and employment.

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