If the rate of inflation in the economy is steady at 5 percent per year, how does the short-run Phillips curve predict that the unemployment rate will be changing, if at all? Does your answer change if inflation in the economy is 0 percent?
Illustrate your answer with a Phillips curve.
If the rate of inflation is constant at 5 percent per year, then the price level is rising, but the unemployment rate should remain constant, as shown in the graph below (as long as inflation is at 5 percent, the unemployment rate does not change). If inflation is 0 percent, then the Phillips curve would predict that unemployment will be higher than it was when inflation was 5 percent (assuming no change in inflation expectations), but as long as inflation is constant at 5 percent, there will be no change in the unemployment rate.
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The change illustrated in the figure above can be the result of the Fed ________ government securities in the open market and will ultimately lead to ________ in aggregate demand
A) selling; an increase B) selling; no change C) buying; no change D) buying; an increase E) selling; a decrease
Many firms use technology to gather information on the preferences of consumers and their responses to changes in prices. This information is then used to adjust prices of the firms' goods and services. This practice is called
A) price discovery. B) yield management. C) empirical research. D) econometrics.