If the economy experiences an unanticipated demand shock and households and firms have rational expectations, there is
A) no trade-off between unemployment and inflation in either the short run or the long run.
B) a trade-off between unemployment and inflation in the long run, but not in the short run.
C) a trade-off between unemployment and inflation in the short run, but not in the long run.
D) a trade-off between unemployment and inflation in both the short run and the long run.
C
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Suppose that in 2011, 4 million plasma TVs were purchased at $950 each, while in 2012, 3 million plasma TVs were purchased at $800 each. What might have caused this change?
A) The price of LCD TVs (a substitute for plasma TVs) fell. B) The price of LCD TVs (a substitute for plasma TVs) rose. C) Plasma TV manufacturing technology decreased. D) Plasma TV manufacturing technology increased.
Which of the following is a monetary policy tool used by the Federal Reserve Bank?
A. Decreasing the rate at which banks can borrow money from the Federal Reserve B. Increasing the reserve requirement from 10% to 12.5% C. Buying 500 million worth of government securities, such as treasury bills D. All of the above