Based on the Phillips Curve, when the actual rate of inflation is greater than the expected rate, the unemployment rate will:
A. Rise temporarily, but decreases in nominal wages will bring the expected and actual rates of inflation into balance
B. Rise temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance
C. Fall temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance
D. Fall temporarily, but decreases in nominal wages will bring the actual and expected rates of inflation into balance
C. Fall temporarily, but increases in nominal wages will bring the expected and actual rates of inflation into balance
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What will be an ideal response?
Figure 17-1
Which of the following is true about the economy depicted in Figure 17-1?
a.
It is experiencing supply-side inflation.
b.
Policy makers have chosen to fight inflation rather than unemployment.
c.
The increase in aggregate demand has increased prices but not real GDP.
d.
The slope of the aggregate supply curve embodies the trade-off between unemployment and inflation.