Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds
If the assumptions of the rational expectations school hold true, and the Fed's announcement is credible, the rate of unemployment will be ________ in the short run.
A) less than 5.5 percent B) 5.5 percent
C) between 5.5 and 7.5 percent D) 7.5 percent
B
You might also like to view...
A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:
A. more elastic the supply curve. B. larger the elasticity of demand coefficient. C. more elastic the demand for the product. D. more inelastic the demand for the product.
One assumption of the perfectly competitive model is free entry and exit. This assumption most directly leads to the implication that:
A. firms will compete on the basis of better service rather than lower prices. B. positive economic profit is only possible in the short run. C. firms will have to spend money on advertising. D. a long-run equilibrium cannot be achieved.