If workers accurately predict the rate of inflation, is there a short-run trade-off between inflation and unemployment, as predicted by the Phillips curve? Why or why not?
What will be an ideal response?
If workers accurately predict the rate of inflation, then they will incorporate wage adjustments into their contracts that will take inflation into account. The result is no change in the real wage, and no change in the unemployment rate, indicating that there is no trade-off between inflation and unemployment. Instead, the Phillips curve would be vertical.
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Which of the following is classified as an intermediate good?
i. the purchase of a Big Mac by a college student ii. McDonald's purchase of pickles iii. a McDonald's restaurant owner's interest payment for the loan on her building A) ii only B) ii and iii C) i only D) i and iii E) i, ii and iii
What is the relationship between real and nominal GDP?
a. real GDP = nominal GDP – Price level b. nominal GDP = Real GDP/Price level c. real GDP = nominal GDP/Price level d. real GDP = nominal GDP + Price level.