How does the money wage rate change along the Phillips curves? Along the short-run Phillips curve, the money wage rate _______, and along the long-run Phillips curve, the money wage rate _______. A.rises by the same percentage as the inflation rate; rises by the same percentage as the inflation rate B.is constant; is constant C.rises by the same percentage as the inflation rate; is constant D.is constant; rises by the same percentage as the inflation rate sthanksscreenshot atttached **A Sample Correct Answer:**The graph illustrates the relationship between the inflation rate and the unemployment rate using the Long-Run Phillips Curve (LRPC) and Short-Run Phillips Curves (SRPCs).- **Axes:** - The horizontal axis represents the unemployment rate (percent per year), ranging from 0% to 12%. - The vertical axis represents the inflation rate (percent per year), ranging from 0% to 20%.- **Curves:** - **LRPC (Long-Run Phillips Curve)**: This is shown as a vertical line intersecting the horizontal axis at an unemployment rate of 6%. It indicates that in the long run, there is no trade-off between inflation and unemployment. - **SRPC₁ (Short-Run Phillips Curve 1)**: The blue curve, labeled SRPC₁, initially intersects the LRPC at the point where the unemployment rate is 6% and the inflation rate is 5%. - **SRPC₂ (Short-Run Phillips Curve 2)**: The pink curve, labeled SRPC₂, is positioned to the left of SRPC₁, indicating a situation of higher inflation expectations. It intersects the LRPC at an inflation rate of 15% and maintains an unemployment rate of 6%.- **Points:** - Point 1: It corresponds to an inflation rate of 5% and an unemployment rate of 6% on SRPC₁. - Point 2: It corresponds to an inflation rate of 15% and an unemployment rate of 6% on SRPC₂.This graph demonstrates how short-run economic policies can reduce unemployment below its natural rate, but with a trade-off in terms of increased inflation, shifting the economy from SRPC₁ to SRPC₂.

The graph has the rate of inflation values at the y-axis, and the rates of unemployment on the…

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ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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How does the money wage rate change along the Phillips curves?

Along the short-run Phillips curve, the money wage rate _______, and along the long-run Phillips curve, the money wage rate _______.

rises by the same percentage as the inflation rate; rises by the same percentage as the inflation rate

is constant; is constant

rises by the same percentage as the inflation rate; is constant

is constant; rises by the same percentage as the inflation rate

thank

screenshot atttached

**A Sample Correct Answer:**

The graph illustrates the relationship between the inflation rate and the unemployment rate using the Long-Run Phillips Curve (LRPC) and Short-Run Phillips Curves (SRPCs).

- **Axes:**
- The horizontal axis represents the unemployment rate (percent per year), ranging from 0% to 12%.
- The vertical axis represents the inflation rate (percent per year), ranging from 0% to 20%.

- **Curves:**
- **LRPC (Long-Run Phillips Curve)**: This is shown as a vertical line intersecting the horizontal axis at an unemployment rate of 6%. It indicates that in the long run, there is no trade-off between inflation and unemployment.
- **SRPC₁ (Short-Run Phillips Curve 1)**: The blue curve, labeled SRPC₁, initially intersects the LRPC at the point where the unemployment rate is 6% and the inflation rate is 5%.
- **SRPC₂ (Short-Run Phillips Curve 2)**: The pink curve, labeled SRPC₂, is positioned to the left of SRPC₁, indicating a situation of higher inflation expectations. It intersects the LRPC at an inflation rate of 15% and maintains an unemployment rate of 6%.

- **Points:**
- Point 1: It corresponds to an inflation rate of 5% and an unemployment rate of 6% on SRPC₁.
- Point 2: It corresponds to an inflation rate of 15% and an unemployment rate of 6% on SRPC₂.

This graph demonstrates how short-run economic policies can reduce unemployment below its natural rate, but with a trade-off in terms of increased inflation, shifting the economy from SRPC₁ to SRPC₂.

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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