If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer
Unemployment falls. The decrease in expected inflation shifts the short-run Phillips curve to the left. This means that at any given inflation rate, the unemployment rate is lower.
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By fixing its exchange rate, China is most likely
A) achieving a low inflation rate by anchoring to the U.S. inflation rate. B) keeping its export prices low. C) making it easier to compete in world markets. D) Both B and C.
Monetarist and Keynesian theories of money demand differs in that
a. Monetarists assumes that the demand for money is highly inelastic while Keynes assumes money demand is elastic. b. Monetarists assumes that the money demand function is highly stable while Keynes assumes it is unstable. c. Monetarists assumes that there is only a transactions demand for money while Keynes also considers the precautionary and speculative demands for money. d. Monetarists assume that the proportion of income held in theform of money is constant while Keynes believes it varies. e. all of the above.