Relationship between inflation and unemployment .

Question

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Answer 1

Question

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.

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

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A linear programming computer package is needed. As part of the settlement for a class action lawsuit, Hoxworth Corporation must provide sufficient cash to make the following annual payments (in thousands of dollars). 6 Year 1 23. 4 Payment 160 185 210 255 285 430 The annual payments must be made at the beginning of each year. The judge will approve an amount that, along with earnings on its investment, will cover the annual payments. Investment of the funds will be limited to savings (at 4% annually) and government securities, at prices and rates currently quoted in The Wall Street Journal. Hoxworth wants to develop a plan for making the annual payments by investing in the following securities (par value = $1,000). Funds not invested in these securities will be placed in savings. Security Current Price 1 $1,055 Rate (%) Years to Maturity 6.750 3 2 $1,000 5.125 Assume that interest is paid annually. The plan will be submitted to the judge and, if approved, Hoxworth will be required to…

Answer 2

Question

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.

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

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Answer 3

Question

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.

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

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Answer 4

Question

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.

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

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Answer 5

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

Answer 6

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.

Economics Concept Introduction

Philips curve: Phillips curve shows the inverse relationship between inflation and unemployment.

Inflation: Inflation refers to the tendency of increasing price.

Answer 7

Chapter 35, Problem 1CQQ

To determine

Relationship between inflation and unemployment.

Answer 8

Expert Solution & Answer

Answer to Problem 1CQQ

Option “b” is the correct answer.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Option (b):

When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment.

The increase in money supply reduces the interest rate, increases the inflation, and increases the investment. Increasing investment leads to an increase in the employment and income. When the inflation rate increases, the unemployment rate will decrease. There is a negative relationship between inflation and unemployment. Thus, option “b” is correct.

Option (a):

There is a negative relationship between inflation and unemployment. Therefore when inflation increases, the unemployment rate will fall. Thus, option “a” is incorrect.

Option (c):

When the Federal Reserve increases the aggregate demand, it leads to a higher inflation rate in the economy. Thus, option “c” is incorrect.

Option (d):

When the Federal Reserve increases the money supply and expands the aggregate demand, it moves the economy along the Phillips curve to a point with higher inflation and lower unemployment. The increase in demand will lead to an increase in the price level; ultimately leads to an increase in the inflation rate in the economy. Thus, option “d” is incorrect.