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.
Correct Answer:
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Q2: The Phillips curve is the relation between
Q6: According to the expectations-augmented Phillips curve,
A)If inflation
Q8: Suppose most people had anticipated that inflation
Q9: Friedman and Phelps argued that the Phillips
Q10: The Phillips curve appeared to fit the
Q11: In the extended classical model,an unexpected decrease
Q12: In the expectations-augmented Phillips curve π =
Q14: The Bank of Canada announces that it
Q16: In the extended classical model,an unanticipated increase
Q19: Friedman and Phelps suggested that there should
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