Consider the table below. Is the data presented consistent with the Phillips curve model of wage determination? The natural rate of unemployment is 5% Point A B Unemployment rate 12% 12% Expected inflation rate 2% -2% Percent increase in wages 0% 0% Enter the letter of the statement below that best explains your reasoning: A. The rate of wage increase is higher when expected inflation is higher at the same rate of unemployment. This is consistent with the Phillips curve model of wage determination B. The rate of wage increase is lower when the unemployment rate is lower at the same rate of expected inflation. This is not consistent with the Phillips curve model of wage determination C. The rate of wage increase at the natural rate of unemployment differs by the difference in the expected rate of inflation. The Phillips curve has shifted up to take into account expected inflation. This is consistent with the Phillips curve model of waged determination D. Money wage decreases do not take place as expected inflation is negative even at the same rate of unemployment, a rate far above the natural rate of unemployment. This set of data could capture the phenomenon or rigid money wages in a Phillips curve framework.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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A5 

Subject - economics 

Choices for first blank are No, Yes or Uncertain 

 

Consider the table below. Is the data presented consistent with the Phillips curve model of wage determination?
The natural rate of unemployment is 5%
Point
A
B
Unemployment rate
12%
12%
Expected inflation rate
2%
- 2%
Percent increase in wages
0%
0%
Enter the letter of the statement below that best explains your reasoning:
A. The rate of wage increase is higher when expected inflation is higher at the same rate of unemployment. This is consistent with the Phillips curve
model of wage determination
B. The rate of wage increase is lower when the unemployment rate is lower at the same rate of expected inflation. This is not consistent with the
Phillips curve model of wage determination
C. The rate of wage increase at the natural rate of unemployment differs by the difference in the expected rate of inflation. The Phillips curve has
shifted up to take into account expected inflation. This is consistent with the Phillips curve model of waged determination
D. Money wage decreases do not take place as expected inflation is negative even at the same rate of unemployment, a rate far above the natural rate
of unemployment. This set of data could capture the phenomenon or rigid money wages in a Phillips curve framework.
Transcribed Image Text:Consider the table below. Is the data presented consistent with the Phillips curve model of wage determination? The natural rate of unemployment is 5% Point A B Unemployment rate 12% 12% Expected inflation rate 2% - 2% Percent increase in wages 0% 0% Enter the letter of the statement below that best explains your reasoning: A. The rate of wage increase is higher when expected inflation is higher at the same rate of unemployment. This is consistent with the Phillips curve model of wage determination B. The rate of wage increase is lower when the unemployment rate is lower at the same rate of expected inflation. This is not consistent with the Phillips curve model of wage determination C. The rate of wage increase at the natural rate of unemployment differs by the difference in the expected rate of inflation. The Phillips curve has shifted up to take into account expected inflation. This is consistent with the Phillips curve model of waged determination D. Money wage decreases do not take place as expected inflation is negative even at the same rate of unemployment, a rate far above the natural rate of unemployment. This set of data could capture the phenomenon or rigid money wages in a Phillips curve framework.
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