Explain how the unexpectedly high rate of productivity growth at the end of the 1990s affected inflation and unemployment during this period
What will be an ideal response?
The unexpectedly high rate of growth of productivity would cause firms' costs to drop. This would cause (if unexpected) a reduction in unemployment. So, we would observe a simultaneous drop in u and drop in inflation.
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Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24 . Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?