Answered: There is a new central bank president…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run?

a.People know the central bank president's true desires and believe he will stay in office for a long time

b.Peoples' wage wage contracts are long-lasting.

c.People know the central bank president's true desires and believe that he will only be in office for a short time.

d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time.

e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a

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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