Workers and firms both expect that prices will be 3% higher next year than they are this year. As a result,
A) the short-run aggregate supply curve will shift to the left as wages increase.
B) the purchasing power of wages will rise if wages increase by 3%.
C) workers will be willing to take lower wages next year.
D) aggregate demand will increase by 3%.
A
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Refer to Figure 12.3. Suppose the economy is initially at full employment with real GDP equal to potential GDP, and the Fed does not target interest rates, allowing the real interest rate to change like it did during the Great Depression. This would be reflected as a movement from ________ in the IS-MP model and ________ the Phillips curve.
A) point Y to point X; a movement up B) point X to point Y; a movement down C) point Z to point Y; a movement up D) point Y to point Z; a movement down
In the long-run, the inflation rate will move very closely with ________
A) the growth rate of the money supply B) the change in government debt C) the growth rate of government expenditures D) changes in tax rates