The slope of the short-run Phillips curve is consistent with:
a. the long-run trade-off between the unemployment rate and inflation.
b. the long-run trade-off between inflation and GDP.
c. the short-run trade-off between the money supply and interest rates.
d. the short-run trade-off between business productivity and wage contracts.
e. the short-run trade-off between the unemployment rate and inflation.
e
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Interest rates in the economy have risen. How will this affect aggregate demand and equilibrium in the short run?
A) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise. B) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall. C) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall. D) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.
The U.S. economy is not a perfectly competitive market. There are costs associated with negotiating contracts, enforcing agreements, taxes and less than perfectly competitive firms. Nevertheless, according to Wallis and North (1986), the U.S
economy has grown in the presence of these transaction costs and these costs have risen sharply as a percentage of GDP between 1890 and 1970. Indicate whether the statement is true or false