A. W. Phillips' 1958 paper examined unemployment and wage growth. What role, if any, does wage growth play in the modern Phillips curve?
What will be an ideal response?
The modern Phillips curve relates unemployment to inflation, rather than wages. This allows inclusion of expected inflation and price shocks as causes of inflation, in addition to the unemployment gap. But the central idea remains that changes in inflation are driven by wage changes. When wages are sticky, then unemployment gaps have a small impact on inflation, while flexible wages cause large changes in inflation.
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Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?
A) Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries. B) Supporters of protectionism believe that free trade will lead to inflation. C) The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment. D) Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage.
When a prisoners' dilemma game is repeated a finite number of times (T)
A) cooperation unravels during the first round of the game, resulting in the static game Nash equilibrium. B) cooperation continues until the T-2 round, where the players will switch to a non-cooperative Nash equilibrium. C) firms cooperate and achieve the collusive Nash equilibrium for all rounds. D) None of the above.